Editorial: Get the sugar balance right

All through summer, the Union government assured the nation that sugar stocks for domestic consumption are adequate this year and that the festive season would pass without an increase in retail prices. But well ahead of the festivals, sugar prices have spurted nationwide with 18 states reporting increases in the range of 40-50% year on year. In Chennai, sugar is ruling at Rs 65 per kg, up Rs 10-15 in the past fortnight, and traders are anticipating a peak of Rs 100 per kg by the end of the year.

This is a somewhat anomalous situation because India is the second largest producer of sugar in the world — producing upwards of 32 million metric tonnes (MMT) annually, or about 15% of the global output — and therefore has some influence on prices, both at home and abroad. However, India is also the world's largest consumer of sugar, so more than 90% of its production goes to the domestic market. When confidence in production is high, as it was back in November 2025, the Union government allows companies to export some of their output — often not more than about 2.5% of the aggregate output because domestic price stability is paramount. In the past five years, the government has been diverting some sugarcane juice output to its ethanol programme, accounting for 7-9% of sugar equivalent.

So, the key to keeping retail prices stable is getting production forecasts right at the start of the sugar year (Oct-Sept). That math went awry this year. The government estimated 34.3 MMT for the 2025-26 sugar season and the industry lobby, the Indian Sugar & Bio-energy Manufacturers Association, was even more optimistic. Expecting a bumper crop, the government okayed 1.5 MMT for export. However, the two biggest sugar-producing states, Maharashtra and Uttar Pradesh, had a bad year due to untimely rains and an outbreak of disease, and actual production fell by 11%. With the ethanol programme taking away 3.4 MMT of sugar equivalent, the net output of 27.9 MMT is unlikely to be sufficient for domestic consumption.

When reality began to dawn, the government hastily put a stop to sugar exports and launched measures against hoarding. From now through to the end of November, sugar dealers can hold no more than 400 tonnes in stock and bulk consumers cannot store more than 15 days of supply. More importantly, for the first time in 10 years, the government has decided to import 1 MMT of sugar. However, these imports are going to take a few months to arrive and will be in the form of raw sugar, which will need further processing. There is a strong likelihood that a further spurt in retail prices during the festival season is unavoidable.

While contingency measures such as advancing the next crushing season, to bring fresh stocks into the market, may mitigate the situation a bit, what this brings to the fore is the need for at least three policy corrections. One is that the government needs to fine tune its forecasting models with better data from the field. The second is to revisit the policy balance between domestic consumption, export, and the ethanol programme. And the third is to not give in to the industry lobby which would benefit from exports at the cost of domestic consumers.