With sugar touching ₹100/kg ahead of Diwali, veteran journalist with 25 years of experience unpacks the ethanol dilemma, rice diversion, and what this means for your household budget. A deep dive into India’s sweet crisis.
Sugar Prices Hit Record Highs: A Bitter Pill to Swallow as India’s Festive Season Approaches
By [Barkat Khan ] Senior Journalist (25 Years in Financial & Agricultural Reporting)
For three decades, I have watched the ebb and flow of India’s agricultural commodities—the monsoons that bring hope, the policy shifts that ripple through mandis, and the festivals that test the resilience of the common man. But rarely have I witnessed a crisis as sticky and as troubling as the one unfolding in our sugar bowls today.
As we stand on the cusp of the 2026 festive season—a time when mithai flows freely and families gather to celebrate—a shadow looms large over the kitchen shelves. Sugar, the humble sweetener that forms the backbone of Indian celebrations and daily chai, has breached all previous records. In several metropolitan cities and even in tier-2 towns, retail prices have soared to an eye-watering ₹100 per kilogram. For the average household, this isn't just an economic statistic; it is a punch to the gut.
But how did we get here? Is this simply the result of a bad monsoon? Far from it. The current sugar crisis is a man-made phenomenon, born out of a complex cocktail of biofuel ambitions, shifting agricultural priorities, and a government walking a tightrope between energy security and food inflation.
The Elephant in the Room: The Ethanol Distraction
Let’s cut to the chase. The single most significant driver of this unprecedented price surge is the aggressive push towards Ethanol Blended Petrol (EBP). For the uninitiated, ethanol—an agro-based fuel—is primarily derived from sugarcane molasses. In a bid to reduce our reliance on imported fossil fuels and cut carbon emissions, the central government has progressively advanced its ethanol blending targets. We are now aiming for a 20% blending target (E20), a commendable environmental goal, but one that has had the perverse effect of strangling the sugar supply chain.
What we are witnessing is a classic case of demand exceeding supply, not because we are eating more sugar, but because we are burning it—quite literally—in our cars. Distilleries are now offering farmers and millers prices for sugarcane that are often more lucrative than the domestic sugar market. Consequently, a significant portion of the cane yield is being diverted towards ethanol production, leaving millers with less sugar to package and dispatch to the open market.
In my 25 years of reporting, I have seen policy decisions create supply shocks, but the scale of this diversion is unprecedented. The sugar industry, traditionally a buffer for rural distress, is now a cog in the energy machinery, and the consumer is paying the price for this transition.
Let’s cut to the chase. The single most significant driver of this unprecedented price surge is the aggressive push towards Ethanol Blended Petrol (EBP). For the uninitiated, ethanol—an agro-based fuel—is primarily derived from sugarcane molasses. In a bid to reduce our reliance on imported fossil fuels and cut carbon emissions, the central government has progressively advanced its ethanol blending targets. We are now aiming for a 20% blending target (E20), a commendable environmental goal, but one that has had the perverse effect of strangling the sugar supply chain.
What we are witnessing is a classic case of demand exceeding supply, not because we are eating more sugar, but because we are burning it—quite literally—in our cars. Distilleries are now offering farmers and millers prices for sugarcane that are often more lucrative than the domestic sugar market. Consequently, a significant portion of the cane yield is being diverted towards ethanol production, leaving millers with less sugar to package and dispatch to the open market.
In my 25 years of reporting, I have seen policy decisions create supply shocks, but the scale of this diversion is unprecedented. The sugar industry, traditionally a buffer for rural distress, is now a cog in the energy machinery, and the consumer is paying the price for this transition.
The Rice Conundrum: Adding Fuel to the Fire
To understand the full extent of the crisis, one cannot ignore the role of rice. While sugar prices were already volatile, the decision to allow the use of surplus rice—particularly broken rice—for ethanol production has exacerbated the situation.
Here is the irony: When rice prices began to climb due to domestic supply concerns and erratic weather patterns, the cost of producing ethanol from rice became expensive. This should have theoretically eased the pressure on sugarcane diversion. Instead, what we saw was a competitive scramble for the same feedstock. Farmers, realising that both rice and sugarcane were in high demand for biofuel, began hedging their bets. This pushed the Minimum Support Price (MSP) dynamics into a tailspin.
However, the real curveball came when rice prices surged, making sugarcane an even more attractive option for ethanol production. The result? A double whammy. Not only was sugar supply tight, but the cost of production for millers also shot up, which they inevitably passed on to the retailers, and ultimately, to you and me.
To understand the full extent of the crisis, one cannot ignore the role of rice. While sugar prices were already volatile, the decision to allow the use of surplus rice—particularly broken rice—for ethanol production has exacerbated the situation.
Here is the irony: When rice prices began to climb due to domestic supply concerns and erratic weather patterns, the cost of producing ethanol from rice became expensive. This should have theoretically eased the pressure on sugarcane diversion. Instead, what we saw was a competitive scramble for the same feedstock. Farmers, realising that both rice and sugarcane were in high demand for biofuel, began hedging their bets. This pushed the Minimum Support Price (MSP) dynamics into a tailspin.
However, the real curveball came when rice prices surged, making sugarcane an even more attractive option for ethanol production. The result? A double whammy. Not only was sugar supply tight, but the cost of production for millers also shot up, which they inevitably passed on to the retailers, and ultimately, to you and me.
The Ground Reality: From 70 to 100 and Beyond
Walking through the wholesale markets of Delhi and Mumbai last week, the despair among shopkeepers was palpable. A retailer in Ghaziabad told me, "I have been selling sugar for 20 years. I have never seen it cross ₹70, and now we are touching ₹100. Customers are buying half-kilograms instead of kilos. How do I tell them it’s not my fault?"
The price band of ₹70 to ₹100 per kg is not just a number; it represents a shift in the socio-economic landscape of the nation. For the average Indian family, sugar is not a luxury; it is a staple. It is the preservative in jams, the base of syrups, and the essence of festive sweets. When the price of sugar rises, it triggers a cascading effect on the entire food processing industry. Biscuit manufacturers, confectioners, and soft drink giants are all grappling with margin pressures, which will inevitably lead to a broader rise in the cost of finished goods.
Walking through the wholesale markets of Delhi and Mumbai last week, the despair among shopkeepers was palpable. A retailer in Ghaziabad told me, "I have been selling sugar for 20 years. I have never seen it cross ₹70, and now we are touching ₹100. Customers are buying half-kilograms instead of kilos. How do I tell them it’s not my fault?"
The price band of ₹70 to ₹100 per kg is not just a number; it represents a shift in the socio-economic landscape of the nation. For the average Indian family, sugar is not a luxury; it is a staple. It is the preservative in jams, the base of syrups, and the essence of festive sweets. When the price of sugar rises, it triggers a cascading effect on the entire food processing industry. Biscuit manufacturers, confectioners, and soft drink giants are all grappling with margin pressures, which will inevitably lead to a broader rise in the cost of finished goods.
The Inflationary Spiral: More Than Just Sugar
This brings us to the broader macroeconomic picture. The surge in sugar prices is not an isolated incident; it is a symptom of a deeper malaise—inflation. When the cost of agricultural raw materials spirals, it feeds into the Wholesale Price Index (WPI) and the Consumer Price Index (CPI).
The Reserve Bank of India (RBI) has been vigilant, but supply-side shocks are notoriously difficult to tame with monetary policy alone. While the central bank can adjust repo rates to curb demand, it cannot magically produce more sugarcane. We are looking at a stagflationary environment where growth is sluggish, but prices remain stubbornly high.
The use of rice and sugarcane for ethanol has effectively created a "food versus fuel" dilemma. While the world pats us on the back for green energy, the Indian consumer is left to grapple with the harsh reality of the "fuel versus food" equation. Every litre of ethanol produced is a litre of sugar or a kilogram of rice taken away from the public distribution system and the open market.
This brings us to the broader macroeconomic picture. The surge in sugar prices is not an isolated incident; it is a symptom of a deeper malaise—inflation. When the cost of agricultural raw materials spirals, it feeds into the Wholesale Price Index (WPI) and the Consumer Price Index (CPI).
The Reserve Bank of India (RBI) has been vigilant, but supply-side shocks are notoriously difficult to tame with monetary policy alone. While the central bank can adjust repo rates to curb demand, it cannot magically produce more sugarcane. We are looking at a stagflationary environment where growth is sluggish, but prices remain stubbornly high.
The use of rice and sugarcane for ethanol has effectively created a "food versus fuel" dilemma. While the world pats us on the back for green energy, the Indian consumer is left to grapple with the harsh reality of the "fuel versus food" equation. Every litre of ethanol produced is a litre of sugar or a kilogram of rice taken away from the public distribution system and the open market.
The Festive Season: A Time of Worry
The timing of this price surge could not be worse. As we approach Ganesh Chaturthi and Diwali, the demand for sugar in the mithai and confectionery sectors traditionally skyrockets. Families who have been facing the brunt of high fuel prices and everyday grocery costs are now confronted with a festive season that feels more like a financial burden than a celebration.
I recall the days when a kilo of sugar cost a pittance, and sweets were a symbol of generosity. Today, the sentiment is shifting. A sweet shop owner in Lucknow admitted, "We are trying not to increase the price of our laddus and barfis, but we have to use less sugar and more artificial sweeteners, which changes the taste. The customer is not happy."
The timing of this price surge could not be worse. As we approach Ganesh Chaturthi and Diwali, the demand for sugar in the mithai and confectionery sectors traditionally skyrockets. Families who have been facing the brunt of high fuel prices and everyday grocery costs are now confronted with a festive season that feels more like a financial burden than a celebration.
I recall the days when a kilo of sugar cost a pittance, and sweets were a symbol of generosity. Today, the sentiment is shifting. A sweet shop owner in Lucknow admitted, "We are trying not to increase the price of our laddus and barfis, but we have to use less sugar and more artificial sweeteners, which changes the taste. The customer is not happy."
A Human Perspective: The Small Shopkeeper
It is easy to get lost in the macroeconomics of MSP, supply chains, and blending targets. But let us not forget the human element. The local kirana store owner, who buys sugar in 50-kg sacks, is struggling to keep his stock. He is worried about the initial capital outlay. With sugar prices high, he has to lock in more money into inventory, reducing his ability to stock other essentials.
In rural Maharashtra, I spoke to a sugarcane farmer who is caught in a paradox. While he is getting a better price for his crop from distilleries, he is paying more for his daily essentials. As he put it, "I might be earning more from my cane, but the money is worthless when a kilo of sugar costs as much as a litre of milk. Where is the benefit?"
This is the core of the human story. The farmer is not benefiting from the high prices because his input costs—fertilisers, labour, and transport—have also skyrocketed. The middlemen are taking a cut, and the consumer is bleeding. The only ones making money are the distilleries and the arbitrageurs, at least for now.
It is easy to get lost in the macroeconomics of MSP, supply chains, and blending targets. But let us not forget the human element. The local kirana store owner, who buys sugar in 50-kg sacks, is struggling to keep his stock. He is worried about the initial capital outlay. With sugar prices high, he has to lock in more money into inventory, reducing his ability to stock other essentials.
In rural Maharashtra, I spoke to a sugarcane farmer who is caught in a paradox. While he is getting a better price for his crop from distilleries, he is paying more for his daily essentials. As he put it, "I might be earning more from my cane, but the money is worthless when a kilo of sugar costs as much as a litre of milk. Where is the benefit?"
This is the core of the human story. The farmer is not benefiting from the high prices because his input costs—fertilisers, labour, and transport—have also skyrocketed. The middlemen are taking a cut, and the consumer is bleeding. The only ones making money are the distilleries and the arbitrageurs, at least for now.
The Way Forward: What Can Be Done?
As a journalist who has covered six governments and a dozen finance ministers, I believe there is a way out, but it requires political will and immediate intervention.
Reconsider the Blending Roadmap: While the E20 target is admirable, we need a staggered approach. A temporary cap on the diversion of sugarcane for ethanol during the festive season could help bridge the supply-demand gap.
Boost Sugarcane Productivity: Instead of diverting more land to sugarcane, we need to focus on increasing yield per hectare through better irrigation and high-yield varieties. The government needs to invest in agricultural R&D.
Ban or Regulate Broken Rice Use: Given the rising rice prices, the government should restrict the use of rice for ethanol production to ensure food security takes precedence over fuel security.
Immediate Stock Release: The government holds a buffer stock of sugar. Releasing this stock into the open market promptly can cool down the speculative prices that are currently plaguing the markets.
Transparent Pricing: We need a national platform where the price of sugar and sugarcane is linked to a global and domestic demand index, ensuring that the farmer gets a fair share while the consumer isn't exploited.
As a journalist who has covered six governments and a dozen finance ministers, I believe there is a way out, but it requires political will and immediate intervention.
Reconsider the Blending Roadmap: While the E20 target is admirable, we need a staggered approach. A temporary cap on the diversion of sugarcane for ethanol during the festive season could help bridge the supply-demand gap.
Boost Sugarcane Productivity: Instead of diverting more land to sugarcane, we need to focus on increasing yield per hectare through better irrigation and high-yield varieties. The government needs to invest in agricultural R&D.
Ban or Regulate Broken Rice Use: Given the rising rice prices, the government should restrict the use of rice for ethanol production to ensure food security takes precedence over fuel security.
Immediate Stock Release: The government holds a buffer stock of sugar. Releasing this stock into the open market promptly can cool down the speculative prices that are currently plaguing the markets.
Transparent Pricing: We need a national platform where the price of sugar and sugarcane is linked to a global and domestic demand index, ensuring that the farmer gets a fair share while the consumer isn't exploited.
Conclusion: A Sticky Situation
The record sugar prices are a wake-up call for our policymakers. It highlights the interconnectedness of energy policy, agricultural economics, and consumer welfare. We cannot treat sugar as a commodity to be burned in cars while ignoring the millions who rely on it for their daily nutrition and festive joy.
As we step into the festive season, the message is clear: India’s sweet tooth is under threat. The need of the hour is not just to stabilise prices but to formulate a comprehensive agricultural policy that balances the demands of industry, the needs of the farmer, and the affordability of the consumer.
The government must act swiftly, not just to save the festivities, but to restore the trust of the common man in the economic system. In the long run, we need to ask ourselves: are we driving on sugar, or are we living on it? Until we find that balance, the bitter taste of inflation will continue to spoil the sweetest of celebrations.
Disclaimer: The views expressed in this article are based on independent research and journalistic experience. Commodity prices are subject to market risks.
The record sugar prices are a wake-up call for our policymakers. It highlights the interconnectedness of energy policy, agricultural economics, and consumer welfare. We cannot treat sugar as a commodity to be burned in cars while ignoring the millions who rely on it for their daily nutrition and festive joy.
As we step into the festive season, the message is clear: India’s sweet tooth is under threat. The need of the hour is not just to stabilise prices but to formulate a comprehensive agricultural policy that balances the demands of industry, the needs of the farmer, and the affordability of the consumer.
The government must act swiftly, not just to save the festivities, but to restore the trust of the common man in the economic system. In the long run, we need to ask ourselves: are we driving on sugar, or are we living on it? Until we find that balance, the bitter taste of inflation will continue to spoil the sweetest of celebrations.
Disclaimer: The views expressed in this article are based on independent research and journalistic experience. Commodity prices are subject to market risks.
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