From Rs 50 to Rs 80 a kilo: Who is making money from India's sugar price surge?

At the heart of the dispute is a simple question: if consumers are paying substantially more for sugar, how much of that increase is reaching sugarcane farmers?The price increase appears to be driven by a combination of lower production, global shortages, seasonal demand and market behaviour. (Photo- ITG)Sugar prices have risen sharply ahead of the festive season, leaving consumers paying more while farmers question who is benefiting from the increase.The government’s average retail price rose from Rs 48.18 per kg on July 20 to Rs 55.70 on August 20, 2026. Market reports suggest that consumers in some places are paying between Rs 70 and Rs 80 per kg, up from around Rs 50 earlier.The government has attributed the increase to lower-than-expected production, festive demand, crop damage, tightening global supplies and market speculation. Farmer organisations allege that traders and sections of the sugar industry are hoarding stocks and creating an artificial shortage.At the heart of the dispute is a simple question: if consumers are paying substantially more for sugar, how much of that increase is reaching sugarcane farmers? FARMERS POINT TO TRADERS AND LARGE PRODUCERSFarmer leader Raju Shetti has alleged a large-scale trading operation involving sugar producers, affiliated trading companies and stored stocks.According to Shetti, sugar traded at around Rs 3,500 to Rs 3,600 per quintal until June. He alleged that some large producers sold sugar at relatively low prices to trading companies linked to them. The stocks were then held back as prices rose. Shetti claimed that subsequent tenders reached around Rs 6,500 per quintal, generating a margin of about Rs 2,200 per quintal for traders after accounting for costs.Based on an estimated 88 lakh tonnes of sugar and the margins involved, he claimed that the alleged trading gains could amount to Rs 22,000–23,000 crore. The allegation has not been independently verified.Shetti argued that sugar prices had remained broadly stable during most of the season and began rising after the government restricted exports. He alleged that traders anticipated higher demand during Ganesh Chaturthi, Dussehra and Diwali and stored supplies to benefit from the increase.He also questioned claims of an immediate shortage, arguing that the country had enough sugar to meet domestic requirements until November.WHY FARMERS MAY NOT BENEFITHigher sugar prices do not automatically result in higher payments to sugarcane growers.Farmers are generally paid according to the government-determined Fair and Remunerative Price or state-advised prices. Their earnings are therefore not directly linked to short-term changes in retail sugar prices.Traders and mills holding unsold stocks are better placed to benefit immediately because they can sell sugar at the higher prevailing price. Retailers may also earn more in absolute terms, depending on their purchase costs and margins.Farmers argue that if mills and traders earn additional revenue from rising prices, sugarcane growers should receive a share.Children of sugarcane farmers recently protested outside the Maharashtra Sugar Commissioner’s Office at Sakhar Sankul in Pune. They demanded better returns for growers, a waiver of pending electricity bills and action against alleged irregularities in the weighing of sugarcane at factories.Farmer Vaibhav Manavatkar said growers should receive a portion of the additional earnings if traders were benefiting from higher sugar prices.PRODUCTION FALLS BELOW ESTIMATEThe government says the price increase cannot be explained by hoarding alone.Sugar production was initially projected at around 343 lakh tonnes based on estimates submitted by sugarcane-growing states. The figure has since been revised to approximately 306 lakh tonnes.India generally produces between 320 lakh and 340 lakh tonnes of sugar annually, while domestic consumption is estimated at 280 lakh to 290 lakh tonnes.Maharashtra Sugar Commissioner Sanjay Kolte said rainfall and other natural factors had affected the sugarcane crop and reduced production compared with the previous year.Sugar production has declined this year compared to last year due to various natural factors. Rainfall and other factors have impacted production, resulting in lower sugar output, Kolte said.Union Minister Pralhad Joshi also cited red rot disease and El Nio as factors behind the decline in agricultural production, including sugar.Despite the lower output, Joshi said India still had a surplus of more than 20 lakh to 25 lakh tonnes over its annual requirement of around 280 lakh tonnes.ETHANOL DIVERSION: HOW BIG A FACTOR?The diversion of sugarcane and sugar for ethanol production has also come under scrutiny.Kolte said the quantity diverted towards ethanol had increased from 15 lakh tonnes last year to 18 lakh tonnes this year.The Centre, however, has rejected ethanol diversion as the primary reason for the latest price increase.According to the government, the share of sugar diverted for ethanol fell from around 12 per cent in 2022–23 to approximately 9 per cent in 2025–26. It also said nearly three-fourths of India’s ethanol is now produced from grains, particularly maize.The government argues that ethanol production helps absorb excess sugar during surplus years. Large unsold stocks can otherwise block mills’ working capital and delay payments to farmers.According to the Centre, mills had paid 97 per cent of sugarcane dues for the 2025–26 season by August 20.GLOBAL SHORTAGE ADDS PRESSURETightening global supplies have also pushed prices higher.The global sugar deficit for 2026–27 is estimated at around 33 lakh tonnes. International prices rose from $474 per tonne on June 30 to $552 on August 20, an increase of more than 16 per cent in less than two months.The rise in global prices makes imports more expensive and can encourage domestic sellers to seek higher prices, particularly when supplies are expected to tighten.The government has cited international shortages, domestic crop damage, festive demand and speculation as contributing factors rather than identifying a single cause.GOVERNMENT MOVES AGAINST HOARDINGThe Centre has imposed a stock limit of 400 tonnes on traders from August 1 to November 30.From September 1, large buyers and wholesale consumers will not be allowed to hold more than 15 days’ worth of sugar. Central and state teams are inspecting mills and warehouses to verify stocks and prevent artificial scarcity.Sugar stored in warehouses must be released into the market within seven days under government guidelines, Kolte said.The government has also allowed duty-free imports of 10 lakh tonnes of raw sugar to increase domestic availability. States and mills have been advised to begin crushing from October 15.Officials expect early crushing and imports to add more than 10 lakh tonnes to the volume normally available in October.WHO IS MAKING THE MONEY?India is the world’s second-largest sugar producer after Brazil. It has 703 sugar mills, including 335 private, 325 cooperative and 43 government-owned units. Of these, 541 operated during the 2025–26 crushing season.Ketan Patel, vice-president of the National Federation of Cooperative Sugar Factories, said India had been expected to produce around 3.2 crore tonnes in 2025–26, but output was closer to 3 crore tonnes.The lower production supports the government’s argument that the market is facing a genuine supply squeeze. But the continued availability of stocks and the sharp pace of the price increase have strengthened allegations of speculation and hoarding.Those holding sugar stocks, including mills and traders, stand to benefit most directly when prices rise. They can sell inventory acquired or produced at lower rates into a more expensive market. Farmers do not receive the same immediate benefit because sugarcane prices are largely fixed before the retail sugar is sold.There is, however, no conclusive evidence yet establishing Shetti’s allegation of a Rs 22,000–23,000 crore scam. Government inspections of mills and warehouses could determine whether supplies were deliberately withheld.For consumers, the immediate result is sugar costing as much as Rs 70–80 per kg in some markets. For farmers, the issue is whether any of the additional revenue earned by mills and traders will reach them.The price increase appears to be driven by a combination of lower production, global shortages, seasonal demand and market behaviour. The unresolved question is how much of the surge reflects genuine scarcity and how much comes from those controlling sugar stocks exploiting the squeeze.- EndsPublished By: Aprameya RaoPublished On: Aug 24, 2026 21:54 IST