India is facing a sharp rise in sugar prices despite producing a record quantity of sugarcane this season. Retail sugar prices, which were around Rs 48 per kg, have increased significantly, with prices crossing Rs 65 per kg in some markets.
The apparent contradiction has a simple explanation: record sugarcane production does not automatically mean record sugar production.
A decline in sugar recovery, crop diseases, lower-than-expected sugar output and tightening supplies have changed India's sugar outlook dramatically. The government has responded by restricting exports, tightening stockholding rules and allowing duty-free imports of raw sugar.
Record Sugarcane Production, But Lower Sugar Recovery
According to the agriculture ministry's third advance estimate, India's sugarcane production for the season was projected at 5,000.63 lakh tonnes.
However, the quantity of sugar produced depends not only on the amount of sugarcane harvested but also on the sugar recovery rate—the amount of sugar that can be extracted from the cane.
For example, a 10% recovery rate means that roughly 10 kg of sugar can be extracted from 100 kg of sugarcane.
This season, the national average recovery rate reportedly declined from around 9.70% to 8.91%.
While the difference may appear small, it becomes significant when applied to millions of tonnes of sugarcane.
As a result, India's expected sugar production for 2025-26 fell sharply from an earlier estimate of around 343 lakh metric tonnes (LMT) to approximately 306 LMT.
Crop Diseases Hurt Sugar Production
The government has attributed the lower sugar recovery to factors including Red Rot disease, Top Borer infestation and waterlogging caused by excess rainfall.
Red Rot is a fungal disease that damages sugarcane internally and can reduce its sucrose content. Top Borer, an insect pest, attacks the upper parts of the sugarcane plant and can also affect crop quality and sugar recovery.
Scientists and field surveys had reportedly identified warning signs in major sugar-producing regions between December 2025 and February 2026.
However, early production estimates continued to suggest a relatively comfortable sugar supply.
The eventual reduction of around 37 LMT from the initial production estimate significantly changed India's supply calculations.
Sugar Exports Were Allowed Before the Outlook Changed
India initially expected sufficient domestic supplies and a surplus that could support exports.
In November 2025, the government allowed sugar mills to export around 15 LMT of sugar. The quota was later increased to 20 LMT.
However, as the production outlook weakened, the government moved to restrict exports. Around 8 LMT had reportedly been exported before tighter restrictions were introduced.
Exports were not the only reason behind the current supply squeeze, but the changing production outlook meant that supply calculations made earlier in the season no longer held.
The government has now taken a major policy reversal by allowing the duty-free import of up to 10 LMT of raw sugar until October 31 to improve domestic availability and help moderate prices.
Did Ethanol Diversion Cause the Sugar Shortage?
The expansion of India's ethanol programme has also raised questions about whether sugarcane diversion towards ethanol reduced the availability of sugar.
The government has rejected this argument as the primary cause of the current price rise.
According to government data, the share of sugar diverted towards ethanol reportedly declined from around 12% in 2022-23 to approximately 9% in 2025-26. At the same time, a growing share of India's ethanol production has shifted towards grain-based feedstocks, particularly maize.
However, ethanol remains an important part of India's overall sugar management strategy.
Sugar mills can choose between producing sugar and using cane-based feedstocks for ethanol. When sugar supplies are abundant, ethanol diversion can help manage surplus stocks. But when sugar production estimates fall, the balance between sugar and ethanol production needs to be adjusted quickly.
Policymakers are now reportedly considering greater reliance on maize and other grains to support ethanol blending while protecting sugar availability.
Hoarding and Stockholding Added to Market Pressure
Lower sugar production created the underlying supply pressure, but market expectations may have intensified the price rise.
As production estimates declined and the crushing season progressed, concerns about tighter supplies increased.
The government said speculation and hoarding by some market participants also contributed to the rising prices.
Authorities responded with inspections and tighter stockholding restrictions. Dealers were limited in the amount of sugar they could store, while bulk consumers using more than 10 tonnes per month were restricted to holding around 15 days' worth of inventory.
The objective is to prevent excessive stock accumulation and ensure that available sugar continues moving through the market.
India's Sugar Production Gap Explained
The numbers show how quickly India's supply outlook changed:
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Initial sugar production estimate: Around 343 LMT
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Latest estimated production: Around 306 LMT
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Difference: Approximately 37 LMT
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Sugar recovery rate: Declined from around 9.70% to 8.91%
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Sugar exported before restrictions: Around 8 LMT
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Raw sugar imports allowed: Up to 10 LMT duty-free
The problem became more difficult because the crushing season was nearing its end.
Once sugar mills stop crushing sugarcane, production cannot be immediately increased to compensate for a lower-than-expected output. The country must rely largely on available stocks until the next crushing season begins.
From Sugar Exporter to Importer
India's decision to allow duty-free raw sugar imports highlights how significantly the supply situation has changed.
Earlier in the season, India had permitted sugar exports. It is now importing raw sugar to increase domestic availability and prevent prices from rising further ahead of the festive season.
Government data showed the all-India average retail sugar price increasing from Rs 48.18 per kg on July 20 to Rs 55.70 per kg on August 20, while prices in some markets moved significantly higher.
With Ganesh Chaturthi, Dussehra and Diwali expected to increase seasonal demand, the government is attempting to ensure that tightening supplies do not translate into an even larger consumer price shock.
The Bottom Line
India's current sugar shortage highlights an important distinction: sugarcane production and sugar production are not the same thing.
The country produced a record quantity of sugarcane, but lower sugar recovery meant that the crop yielded significantly less sugar than initially expected.
As production estimates fell, earlier assumptions around exports, ethanol production and domestic stock availability became increasingly difficult to sustain.
The result is a dramatic reversal: India entered the season expecting enough sugar to export but is now tightening supplies and allowing imports to control rising prices.
