The E20 ethanol debate has taken a fresh turn, with claims that diverting sugar towards ethanol production has contributed to a surge in sugar prices. The government, however, rejected the contention on Friday (August 21), attributing the rise instead to lower domestic production, increased demand and hoarding.
“It is incorrect to attribute the recent increase in sugar prices to diversion of sugar for ethanol production,” the Ministry of Consumer Affairs, Food & Public Distribution said in a statement. Lower domestic output, festive-season demand and hoarding had prompted the government to impose stock limits and allow duty-free imports to contain prices, he added.
Surging sugar price
The share of sugar diverted for making ethanol for doping in petrol, has, in fact, declined to around 9 per cent in the 2025-26 season from about 12 per cent in 2022-23, while nearly three-fourths of India’s ethanol production now comes from grains, particularly maize, it said.
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The clarification came as retail sugar prices rose to Rs 55.70 a kg on August 20 from Rs 48.18 a kg on July 20. The government attributed the increase to lower-than-expected sugar production, stronger demand ahead of the festive season, weather-related crop damage, tightening global supplies and speculation and hoarding by some sections of the industry.
Government actions
To curb the price rise and ensure adequate availability, the government has imposed a stock limit of 400 tonnes on sugar dealers nationwide until November 30. From September 1, bulk consumers will also be barred from holding stocks exceeding 15 days of consumption.
The government has also approved duty-free imports of 1 million tonnes of raw sugar and ordered physical verification of stocks at mills by joint central and state government teams to check hoarding and artificial scarcity.
Domestic production
The ministry said domestic sugar production in the current season is expected to be around 30.6 million tonnes, compared with an initial estimate of about 34.3 million tonnes by sugarcane-growing states.
It attributed the shortfall to Red Rot and Top Borer diseases affecting sugarcane, as well as waterlogging caused by excess rainfall. Existing stocks remain adequate to meet domestic demand until the new crushing season begins in October, the statement added.
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The global market is also facing tighter supplies. The government estimates a sugar deficit of about 3.3 million tonnes in 2026-27, while international sugar prices have risen more than 16 per cent to USD 552 a tonne on August 20 from USD 474 a tonne on June 30.
Sugarcane industry
The government said the ethanol programme has helped address structural surpluses in the sugar industry, strengthening mill finances and improving payments to farmers.
India typically produces 32-34 million tonnes of sugar annually against domestic consumption of about 28-29 million tonnes. In surplus years, excess inventories can lock up working capital at mills and contribute to delays in payments to sugarcane farmers.
As of August 20, 97 per cent of sugarcane dues for the 2025-26 season had been paid, the government said.
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It added that the industry’s improved finances had reduced its dependence on government support, with around Rs 14,600 crore in subsidies provided between 2014 and 2021 but no similar subsidy announced since 2021-22.
The government has also advised states and mills to begin crushing from October 15. This is expected to lift October sugar production to more than 1 million tonnes, compared with the usual 300,000-400,000 tonnes, helping strengthen supplies during the festive season.
(With agency inputs)