India is facing rising sugar prices despite producing a record sugarcane crop, as lower sugar recovery, crop damage, exports and tightening supplies have created a major supply squeeze ahead of the festive season.
Retail sugar prices, which were around Rs 48 per kg, have crossed Rs 65 in some markets. Although sugarcane production reached a record 5,000.63 lakh tonnes, the amount of sugar extracted from the crop fell sharply.
The national average sugar recovery rate declined from around 9.70% to 8.91%, reducing overall sugar output. Disease outbreaks, including Red Rot and Top Borer, along with waterlogging caused by excess rainfall, damaged crop quality and reduced sugar content.
Sugar production for the 2025-26 season is now estimated at around 306 lakh metric tonnes, compared with an earlier projection of approximately 343 LMT. The lower output tightened the domestic supply outlook after export quotas had already been opened earlier in the season.
The government later restricted exports, tightened stockholding rules and allowed duty-free imports of up to 10 lakh tonnes of raw sugar until October 31 to increase availability and ease prices.
Authorities have rejected claims that ethanol diversion was the main cause of the latest surge, saying the share of sugar diverted for ethanol production has declined. However, balancing sugar and ethanol production remains an important challenge when supply forecasts change.
With festive demand expected to rise further, the government is working to prevent the supply squeeze from developing into a bigger price shock.
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