Sugar Prices Rise Amid Declining Crop Yields and Trader Stockpiling, Experts Say

Retail sugar prices have climbed significantly in recent markets, prompting debate over the causes behind the steep increase. While opposition parties have targeted the Centre over increased ethanol blending in petrol, industry experts and former officials have ruled out ethanol diversion as the main reason for the surge.

Data from the Union Ministry of Agriculture and Farmer Welfare indicates that the area under sugarcane cultivation reduced from 5,885.32 thousand hectares in 2022-23 to 5,449.93 thousand hectares in 2024-25. Total sugarcane production also fell from 490,533.35 thousand tonnes to 453,158.40 thousand tonnes before standing at 454,610.97 thousand tonnes.

Former Maharashtra Sugar Commissioner Shekhar Gaikwad noted that declining sugarcane production and yields are directly affecting overall sugar output. He stated that even with new government policies to increase production, it would take roughly 30 to 36 months to yield results, and noted a contraction in the number of key sugarcane-producing states.

Jayprakash Dandegaonkar, former president of the National Federation of Cooperative Sugar Factories, pointed out that Maharashtra, India's leading sugar producer, has experienced a shortened sugarcane crushing season. Mills that previously crushed cane for about 150 days annually have reduced operations to nearly 100 days due to economic viability challenges. According to Dandegaonkar, mills face financial losses because they pay farmers a Fair and Remunerative Price (FRP) of ₹3,650 per tonne, while the Minimum Support Price (MSP) for sugar stands at ₹3,100.

Bhairavnath Thombre, president of the West Indian Sugar Mills Association (WISMA), explained that ethanol production cannot be held responsible for the current price rise. Thombre noted that while 100 percent of ethanol was produced through sugar diversion in 2020, that share has dropped to approximately 30 percent, with foodgrains now taking a larger share.

Thombre further stated that initial government production estimates dropped from 390 lakh tonnes to an actual output of 310 lakh tonnes, while subsequent exports of around 8 lakh tonnes also impacted domestic availability. Additionally, traders anticipating the effects of El Niño purchased and stockpiled large quantities of sugar. To manage supply, the government has introduced new rules requiring sugar mills to release 15 to 20 lakh tonnes of sugar into the market monthly once the crushing season begins.

"The current rise in sugar prices highlights a classic economic gap between agricultural input costs and fixed minimum support prices, compounded by shifting weather patterns and trader stocking behavior. When crop yields decline and operational spans shrink for mills, market volatility naturally follows. For agribusinesses and retail supply chains, this situation underscores the importance of flexible inventory management and careful monitoring of macro-agricultural policies to navigate supply-demand imbalances effectively." — Dr. Shishir Gupta, Founder & CEO, StartupLanes