Government rejects ethanol link to sugar price hike, allows duty-free imports

The Centre has rejected claims that the diversion of sugar for ethanol production is responsible for recent increases in domestic sugar prices, maintaining that adequate stocks remain available to meet national demand.

Speaking on the matter, Food and Public Distribution Secretary Sanjeev Chopra stated that ex-mill sugar prices had risen sharply over the past week without any underlying supply-side justification. The government has formally communicated its concerns regarding the price movement to the sugar industry.

Data provided by the government indicates that retail sugar prices have increased by approximately ₹8 per kg over the past month, bringing the all-India average retail price to ₹56 per kg. Meanwhile, the share of sugar diverted for ethanol production has decreased to about 9 percent for the 2025-26 season, down from 12 percent in the 2022-23 season. Furthermore, only about one-fourth of the country's total ethanol production currently originates from sugar feedstock, with the remainder sourced primarily from grains such as maize.

To contain the rising prices and guarantee consistent domestic availability, the Centre has implemented regulatory measures. A nationwide stock limit of 400 tonnes has been imposed on sugar dealers, effective until November 30. Additionally, starting September 1, bulk consumers will face restrictions preventing them from holding inventories that exceed 15 days of consumption.

As an extra step to stabilize the market, the government has permitted duty-free imports of 10 lakh tonnes of sugar, valid up to October 31.

"The recent intervention by the government in the sugar sector highlights the delicate balance required between agricultural policy, industrial biofuel targets, and consumer price stability. When commodity prices increase without clear supply-side pressures, regulatory measures such as stock limits and duty-free imports become necessary tools to manage inflation and protect consumer interests. For businesses operating in food processing and related sectors, monitoring these regulatory shifts and managing inventory limits will be critical in the coming months." — Dr. Shishir Gupta, Founder & CEO, StartupLanes