Enough Sugar on Paper, Rising Prices in Markets: The Puzzle Behind India’s Sugar Spike

India’s sugar market is facing an unusual squeeze: stocks are said to be adequate, yet retail prices have jumped sharply, forcing the government to intervene with imports, tighter stock controls and an early start to the crushing season.

Food Secretary Sanjeev Chopra has rejected the argument that ethanol production is responsible for the recent price rise. Retail sugar prices have climbed from about Rs 48 per kg on July 20 to Rs 56 per kg, while ex-mill prices surged from Rs 47-48 to around Rs 62 per kg in just 7-10 days. The government says the increase has no fundamental justification and has accused some players of creating artificial scarcity.

The Centre has asked states to act against hoarding, black marketing and speculation. It is also examining tighter limits for dealers, while bulk consumers will face a 15-day stock limit from September 1.

The government maintains that India will have 33-35 lakh tonnes of closing stocks by September-end, against annual domestic consumption of roughly 280-285 lakh tonnes. Yet it has also approved 10 lakh tonnes of duty-free raw sugar imports, raising an obvious question: if supplies are comfortable, why is additional sugar needed? The answer may lie in the difference between sugar available nationally and sugar actually reaching the market quickly enough.

The next test will come in October. The Centre wants mills to begin crushing around October 15, estimating that this could add 10-12 lakh tonnes of sugar during October. That could provide crucial relief ahead of the festive season.

But early crushing is not guaranteed to deliver the expected volume. Industry representatives have warned of labour shortages, while early harvesting can reduce sugar recovery by around 2-3 per cent. Mills have therefore sought support for the additional costs and losses involved.

The larger issue is whether the government has correctly diagnosed the price surge. Lower production, crop damage and rising festive demand have created genuine supply concerns, while allegations of hoarding and speculative behaviour could be amplifying them.

The coming weeks will show whether imports, tighter stock controls and early crushing can bring prices down, or whether the government will have to take further action to ensure that adequate sugar stocks translate into affordable sugar for consumers.