Some commentators have also blamed the diversion of sugarcane to ethanol production for the shortage in a deficit year. Even earlier, sugar mills would set aside around 10% of their output for this, helping stabilise prices in times of excess production.
But India making E20, or petrol blended with 20% ethanol, the standard fuel at pumps this year, just as sugar output is low, has added to the challenge, experts say.
The government disputes how much the policy is to blame. It says the share of cane diverted to ethanol has fallen from 12% in 2022-23 to around 9% in 2025-26, and argues that weak production, hoarding and tighter global supplies are behind the sugar price surge.
Some in the industry agree. Deepak Ballani of the Indian Sugar Mills Association (ISMA), which represents private mills producing nearly half of India’s sugar, says stocks and monthly quotas for sugar released into the market are comfortable. He argues speculation and hoarding, rather than a genuine shortage, are driving prices higher.
The government has capped stocks held by traders and wholesalers at 400 tonnes for three months to curb hoarding.
Suryavanshi, however, disagrees. India has used such measures before, he says, yet prices continued to climb after the latest restrictions were announced. To him, that points to a real supply squeeze.
And India’s decision to import comes as supplies are tightening globally.
El Niño has affected rainfall in Thailand, while heavy rain has disrupted cane harvesting in Brazil, the world’s largest sugar producer, where mills are also diverting more cane to ethanol. Heatwaves have battered Europe’s sugar beet crop, with France expecting its worst harvest in four years.
US government forecasters expect global production to fall to 184.9 million tonnes this season, from a record 186.1 million tonnes the year before.
London white sugar futures hit $541 a tonne in mid-August, their highest since April 2025, while New York raw sugar futures jumped 4% on the day India announced its imports.
For India, however, sugar availability could improve next year if high prices prompt mills to divert less cane to ethanol.
“At current sugar prices, it simply doesn’t make economic sense for mills to divert cane juice to ethanol, so India’s sugar scenario should be quite all right going forward,” Chaturvedi said.
But the bigger lesson from this year’s squeeze, he added, is clear: it is a “warning that going forward, we need to be a lot more careful in estimating our sugar crop numbers”.