Government could have foreseen the spike in sugar prices

NEW DELHI, 19/01/2016: A sugar trader awaits buyers at the Khari Baoli market in Delhi | Photo Credit: KAMAL NARANG After retail sugar prices surged to unprecedented levels in August, the Union government has rolled out a number of measures to bring down the prices and ensure availability. These included allowing duty-free imports of 10 lakh metric tonnes (MT) of raw sugar till October 31, 2026, for the first time in a decade.While the measures have eased the prices marginally, the sharp jump of 41% from ₹46.27 per kilogram on August 26 in 2025 to a high of ₹65.05 on August 26 this year, has raised questions on whether the government failed to foresee and take preventive measures.The government attributed the sharp rise to a combination of factors such as increased demand ahead of the festive season, hoarding, lower-than-expected production, tightening global supplies and weather-related crop damages. The chart below shows that this year’s increase is an outlier, busting the government’s argument that festive season surge was a key factor.Analysis of some of the other factors — which can be closely monitored by the government — showed that there were ample signals. Kunal Munjal, Senior Research Fellow in the Economic Analysis Unit of Indian Statistical Institute (Bengaluru), said the tightening of domestic sugar availability was not entirely unforeseeable due to indications of pressure on global sugar supplies, including expectations of lower sugar production in Brazil, the world’s largest sugar producer.In the first week of August, the Food and Agriculture Organization (FAO) of the United Nations, said that the FAO Sugar Price Index increased by 5.6% in July, indicating the possibility of further rise. Concerns over the potential impacts on crop yields in the European Union due to hot weather, and El Niño-related weather conditions affecting production in key Asian countries, were some of the reasons the FAO attributed.India‘s sugarcane production has declined since 2022-23, when it hit the highest of 490.5 million MT.The government, while acknowledging this in a reply to the Rajya Sabha in March 2025, had, however, said that production was sufficient to cater to domestic needs. Of all sugar produced, 83% is used for domestic consumption.India’s sugar imports have predominantly been from Brazil. Mr. Munjal said the issue this year has been the gap between production estimates and actual production. “Initial estimates for 2025-26 sugar production were around 343 lakh tonnes, whereas it is now estimated at around 306 lakh tonnes. That is a substantial difference,” he said.He said the estimates for 2026 were initially high despite the trajectory of production declining or at least being subject to fluctuations in Uttar Pradesh and Maharashtra — the two States that together account for 71% of cane and 65% of sugar production. “Based on these estimates, exports were allowed and ethanol diversion targets were set. When actual production subsequently turned out to be lower than estimated, domestic availability became tighter than anticipated,” he added.On the Opposition’s allegation that the price rise was due to diversion for ethanol production, Mr. Munjal said he would not identify that as a key reason in the short term. “It may become more important over the longer term, but that is a separate issue,” he added.He pointed out that in recent years maize occupied a major share of the feedstock for India’s ethanol blending, a shift from heavy dependence on sugarcane. Data showed that there was no such surge when there was heavy reliance on sugar.The data for the charts were sourced from Parliamentary Questions and Answers, the Department of Consumer Affairs (Price Monitoring Division), the Food and Agriculture Organisation of the United Nations (FAO), and the United States Department of Agriculture’s Foreign Agricultural Service (FAS).Gauri Singavarapu is interning with The Hindu’s Data team Published - September 09, 2026 01:00 pm IST