The Ministry of Consumer Affairs, Food and Public Distribution has firmly rejected claims linking ethanol diversion to the recent spike in sugar prices, calling the connection “incorrect” as retail rates jumped from Rs 48.18 per kg on July 20 to Rs 55.70 per kg by August 20.
Why the Government Says Ethanol Isn’t the Culprit
Officials pointed out that the share of sugar diverted for ethanol production has actually declined, falling to around 9 per cent in the 2025-26 season from about 12 per cent in 2022-23. Nearly three-fourths of India’s ethanol output now comes from grains, primarily maize, rather than sugarcane. Food Secretary Sanjeev Chopra called the ethanol-price link “completely baseless,” adding that the shift has strengthened mill finances and improved payments to farmers, with 97 percent of sugarcane dues for 2025-26 already cleared.
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What’s Actually Driving Prices Up
The government instead pointed to a mix of factors: domestic sugar production falling to an estimated 30.6 million tonnes this season, down sharply from an initial projection of 34.3 million tonnes, due to Red Rot and Top Borer crop diseases along with waterlogging from excess rainfall. Festive-season demand, tightening global supplies, and hoarding by parts of the trade have compounded the squeeze. International sugar prices have themselves risen over 16 per cent, and the government projects a global deficit of 3.3 million tonnes for 2026-27.
Import and Stock Rules Tightened
To rein in prices, the Centre has capped stock holdings for dealers at 400 tonnes nationwide until November 30, with bulk consumers such as soft-drink and ice-cream makers barred from holding more than a fortnight’s supply from September 1. The government has also cleared duty-free imports of 1 million tonnes of raw sugar by October 31 and ordered joint central-state teams to physically verify mill stocks to check for artificial scarcity.
