Sugar Prices Soar: Low Output & Trader Hoarding Drive Surge

Indian sugar prices have surged, primarily driven by a significant decline in sugarcane production, shorter crushing seasons, and extensive stockpiling by traders, according to market experts.

Key Market Movers

• Sugar’s ethanol share: dropped to approximately 30% from 100% in 2020.
• Maharashtra crushing season: shortened from around 150 days to about 100 days.
• FRP for farmers: Rs 3,650 per tonne.
• MSP for sugar: Rs 3,100.
• Initial production estimate: 390 lakh tonnes.
• Actual production output: 310 lakh tonnes.
• Export permission: around 8 lakh tonnes of sugar.
• Sugarcane cultivation area (2022-23): 5885.32 thousand hectares.
• Sugarcane cultivation area (2024-25): 5449.93 thousand hectares.

Refuting Ethanol Link

Experts explicitly refute claims that sugar diversion for ethanol production is the primary driver of this price increase. Sugar’s contribution to ethanol has significantly decreased to approximately 30% from 100% in 2020, with foodgrains now forming a larger share of ethanol output.

Production Shortfalls and Unprofitability

Shekhar Gaikwad, former Maharashtra Sugar Commissioner, noted a shrinking area of sugarcane cultivation and reduced tonnage nationwide. He added that any new government policies to boost production would require 30 to 36 months to yield tangible results, indicating a long-term challenge.

Jayprakash Dandegaonkar, former president of the National Federation of Cooperative Sugar Factories, highlighted Maharashtra’s crushing season contraction. The state, a major sugar producer, saw its crushing period shorten from approximately 150 days to about 100 days, largely due to unprofitability for mills.

This unprofitability stems from the gap between the Fair and Remunerative Price (FRP) of Rs 3,650 per tonne paid to farmers and the Minimum Support Price (MSP) of Rs 3,100 for sugar, which creates losses for sugar mills.

Trader Stockpiling and Government Data

Bhairavnath Thombre, president of the West Indian Sugar Mills Association (WISMA), explained that actual sugar output of 310 lakh tonnes fell significantly below the government’s initial estimate of 390 lakh tonnes. Furthermore, government permission to export around 8 lakh tonnes of sugar exacerbated the domestic price increase.

Thombre also attributed the price hike to traders, who, anticipating the impact of El Nino on sugarcane and sugar production, actively purchased and hoarded large quantities of sugar. This strategic stockpiling further tightened market supply.

Data from the Union Ministry of Agriculture and Farmer Welfare confirms a substantial reduction in sugarcane cultivation area. It decreased from 5885.32 thousand hectares in 2022-23 to 5449.93 thousand hectares in 2024-25, directly leading to a decline in overall sugarcane production.

Government Intervention

In response, the government has implemented new rules for sugar purchases. These regulations permit mills to release 15 to 20 lakh tonnes of sugar into the market monthly once the crushing season commences, aiming to stabilize prices.