India’s Sugar Prices Surge Ahead of New Season: Govt May Impose Stock Limits

Sugar prices have been rising at an accelerated pace across the country recently. In Uttar Pradesh, India’s largest sugar-producing state, ex-mill prices have reached ₹4,400 to ₹4,500 per quintal, while wholesale prices in Delhi currently range between ₹4,750 and ₹4,800. In just one month, prices have seen a steep hike of approximately ₹300 per quintal.

Traders estimate that if this upward trend continues, ex-mill prices could touch ₹5,000 to ₹5,100 per quintal by the time the new crushing season begins in October. To keep prices under control, the Central Government is actively considering imposing stock limits on sugar mills and traders. However, industry experts argue that while stock restrictions might offer a temporary fix for retail prices, they risk creating unwarranted pressure on the overall supply chain. Industry associations have clarified that India has sufficient sugar reserves to meet domestic requirements and have strongly advised against panic buying.

Key Factors Driving the Price Hike
Industry sources attribute the sudden surge in sugar prices to a combination of critical factors:

Reduced Production: Total sugar production for the current season is projected to not exceed 2.8 crore (28 million) tonnes.
Ethanol Diversion: A massive volume of approximately 29 lakh (2.9 million) tonnes of sugar has been diverted specifically for ethanol manufacturing.
Export Volumes: An additional 8 lakh (800,000) tonnes were exported earlier this year.

Consequently, total sugar reserves are expected to drop to between 35 lakh and 37.5 lakh tonnes by October. Despite this decline, industry representatives maintain that this inventory is perfectly adequate when compared to average monthly domestic consumption.

Potential Impact on the Ethanol Blending Program
The rising price of sugar has created a new economic dynamic for sugar mills. Selling sugar in the open market is rapidly becoming more profitable than diverting it for ethanol production. Experts warn that this shift could put significant pressure on the Central Government’s ambitious and highly prioritized ethanol blending program.

Furthermore, industry stakeholders have expressed concerns that the government’s frequent shifts in export policies make it increasingly difficult for mills to draft and execute stable, long-term production strategies.