Sugar has always been a political commodity in India. It has become more so with the rise in retail prices — from an average of Rs 45 to Rs 65 per kg within a month —  that is being blamed on the ethanol-blended petrol programme. The truth is more complex — and bitter. Only 27.5 per cent of ethanol supplied by distilleries to oil marketing companies in 2025-26 is being produced from sugarcane juice and molasses; the balance is coming from cereal grains. Also, the estimated 3 million tonnes (mt) of sugar diverted for making ethanol would be hardly a tenth of the 30.9 mt gross production during the year ended September 2026. The preceding four sugar years had also seen diversions of 3.5 mt, 2.4 mt, 4.3 mt and 3.6 mt respectively, but without causing price spikes. Ethanol per se clearly isn’t the villain here.

The current price spiral has more to do with sugar output itself turning out much lower — from an initial 34.4 mt gross projection made at the start of crushing in November. The shortfall of 3.5 mt should have been anticipated much earlier — at least by February, when mills in Uttar Pradesh and Maharashtra were struggling to get cane and even shutting down crushing operations. The government was late to react. It banned exports in mid-May. When ex-factory prices started really soaring from July, as deficient June monsoon rains raised concerns over cane yields and production prospects for the upcoming 2026-27 sugar year too, it went into overdrive. A stock limit of 400 tonnes, along with the condition of not holding any sugar beyond 30 days, was imposed on all dealers. Mills were further, as part of a stock verification exercise, directed to furnish details of all bulk consumers to whom they had sold 500 tonnes or more. These knee-jerk panic actions only added fuel to the fire.

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The simple thing the government should have done is keep the import window open. Rather than banning exports, the tariff on both raw and white sugar imports could have been slashed from 100 per cent to zero by April, when most mills had stopped crushing. The sugar industry is a classic story of controls — the government deciding everything from the pricing of cane to how much each mill can sell in the open market during a particular month — that are destined to fail. This sugar crisis is a result of the government neither investing in market intelligence nor allowing market forces to do the job of balancing supply and demand. In short, a policy failure.