Sugar price surge: Economist blames delayed action, ethanol diversion for pressure

Professor Ashok Gulati said lower sugar output, depleted stocks and ethanol diversion have driven the recent price surge. He said delayed imports and tight government control could worsen supplies before the festive season.Sugar prices could rise further before festive season, warns Economist Ashok GulatiSugar prices have surged sharply in recent weeks, raising concerns ahead of the festive season. In an exclusive interview with India Today’s Rajdeep Sardesai, agricultural economist Professor Ashok Gulati said lower sugar production and depleted stocks are the main reasons behind the spike, while diversion of sugarcane towards ethanol has added to the pressure.“Sugar production was down,” Gulati said, explaining that the situation had been compounded by falling stocks and the diversion of some sugarcane towards ethanol. He said opening stocks had declined from around 8 million tonnes to 5 million tonnes, leaving the supply pipeline severely depleted.Gulati said the government should have recognised the emerging shortage much earlier and taken corrective measures. “The decision should have been taken to open imports, maybe four or five months back,” he said, arguing that the situation could have been managed before stocks reached critically low levels.According to Gulati, sugar production is down by around 10%, making the diversion of sugarcane for ethanol a bigger factor than it might appear in percentage terms. “When production is down, that becomes a factor,” Gulati said. “And whenever you are diverting to ethanol, naturally it becomes a cumulative impact.”He said the government cannot escape responsibility for the current situation because warning signs were visible several months ago. Gulati pointed out that sugar stocks had reached a nine-year low and argued that imports should have been permitted much earlier. “Definitely. This should have been known, well known, roughly seven, eight months back,” he said, adding that early imports could have prevented the sharp price rise.Gulati said the government had several alternatives available, including importing sugar, importing ethanol instead of diverting domestic sugarcane towards ethanol, or encouraging mills to produce more sugar using rice from Food Corporation of India stocks.He also criticised the high import duty on sugar, saying the 100% duty had prevented the market from responding quickly to the emerging shortage.The economist went further in his criticism of India's sugar policy, arguing that the sector is excessively controlled by the government.“This sector within agriculture is the most controlled by the government,” Gulati said. He pointed to controls over sugarcane prices, ex-factory prices and even how much sugar mills can release into the open market.“Nowhere in the world this type of a system exists,” he said, calling for a “fresh wave of liberalisation” in the sugar sector.Gulati also warned that the price situation could worsen before it improves, particularly because the festive season is approaching.“It could be,” he said when asked whether sugar prices could get worse before getting better. “The demand is going to definitely go up because the festive season is starting.”He said delayed imports could further aggravate the situation because fresh supplies would take time to arrive.On the political influence surrounding the sugar industry, Gulati said government control itself meant policymakers had to accept responsibility for the consequences.“When you are controlling every step of the sugar economy, then ultimately government has to take the responsibility,” he said.Gulati also argued that farmers and sugar mills should be allowed to respond to market prices when deciding whether to produce sugar or ethanol. Citing Brazil, he said the industry should be able to shift between the two depending on prevailing prices.“If the sugar prices are good farmers and sugar industry will go more for sugar,” Gulati said, arguing that market forces could provide a more effective mechanism than bureaucratic controls.Later in the interview, Gulati said the current crisis should serve as a warning for policymakers and called for greater liberalisation of the sugar sector.“The time has come... to look at opening up this sector,” he said, warning that excessive government control had contributed to the current sugar price surge.- EndsPublished By: Zafar ZaidiPublished On: Aug 25, 2026 02:06 IST