Sugar prices in India have surged to record levels ahead of the festive season, forcing the government to consider importing the commodity despite the country being one of the world's major sugar producers and exporters.
The all-India average retail price of sugar reached around ₹52.3 per kg on August 18, according to Consumer Affairs Department data. In Punjab, prices have reportedly touched nearly ₹65 per kg, while several other markets have recorded prices in the ₹58–63 per kg range.
Ethanol Push Adds Pressure on Sugar Supply
The price surge has brought renewed focus on India's ambitious Ethanol Blended Petrol (E20) programme. A growing quantity of sugarcane is being diverted towards ethanol production instead of being processed into sugar.
According to industry data cited by India Today, sugarcane accounts for around 30–35% of ethanol feedstock, with maize and rice making up much of the remaining share. India has also rapidly expanded its ethanol infrastructure, with hundreds of distilleries now producing fuel-grade ethanol.
Agriculture expert Sudhir Panwar said diversion of cane towards ethanol has contributed to tighter sugar availability. He also pointed to lower sugarcane productivity and recovery in parts of Uttar Pradesh during the 2025-26 season due to crop disease.
Government Considers Cutting Import Duty
With domestic prices continuing to rise, the government is reportedly considering removing the 100% import duty on sugar to increase supplies.
Such a move would mark a significant shift for India, which has traditionally managed domestic availability through export restrictions and quotas. The country exported more than 12 million tonnes of sugar in 2021-22, but its export policy has tightened considerably since then.
For the 2025-26 season, exports were initially restricted to around 2 million tonnes. In May 2026, the government imposed a broader ban on sugar exports until September 30 to safeguard domestic supplies.
Despite these measures, prices have continued to climb.
Festive Demand Raises Concern
The timing has added urgency to the situation. With Ganesh Chaturthi, Dussehra and Diwali approaching, demand for sugar is expected to increase as households, sweet manufacturers and food businesses prepare for the festive season.
The government is therefore also examining measures to prevent excessive stockpiling by bulk traders. Officials have reportedly been assessing whether restrictions on trader inventories could help prevent hoarding and further price escalation.
E20 Policy Faces a Tough Balancing Act
The sugar crisis has highlighted a broader policy challenge for the Centre. Ethanol blending is aimed at reducing India's dependence on imported crude oil and strengthening energy security, while sugar production remains crucial for food prices, farmers and the domestic market.
The government is now weighing several options, including imports, stock limits, export restrictions and potentially reducing the amount of sugarcane diverted towards ethanol.
The immediate priority is to prevent sugar prices from worsening during the festive season. But the larger question remains whether India's fuel ambitions can be balanced with the need to keep an essential kitchen commodity affordable.