Sugar has suddenly become an unlikely inflation story. Retail sugar prices, which averaged Rs 48 a kilo on 20 July, had climbed to Rs 56 on 20 August. In some markets, prices went up to Rs 60 a kilo. Wholesale prices in Maharashtra, one of India’s principal sugar-producing states, have also climbed sharply.

The Centre’s initial response was to impose stockholding restrictions on dealers and wholesalers. Later, for the first time in a decade, it allowed zero-duty imports of one million tonnes of raw sugar till 31 October. The timing is crucial. The long festival season is about to start. That’s when sugar demand surges and high sugar prices can cost politically.

The current spike in sugar prices does not fully reveal the profound contradictions in India’s fast-restructuring sugar economy. There are political, environmental and agriculture policy variables in play. It’s an industry shaped by guaranteed cane prices for farmers, politically influential sugar mills, water-intensive cultivation, climate volatility, ethanol policy and the government’s perennial dilemma of balancing the interests of farmers and consumers.

India consumes 28-29 million tonnes of sugar a year. In previous decades, production often exceeded consumption, leaving sugar mills grappling with large inventories and low prices. Governments responded with export incentives, buffer-stock measures, soft loans and then a BIG push to divert sugarcane into ethanol production. With the surplus now narrowing, any sign that sugar production might drop leads to panic, as we see this year.

The immediate problem is supply. India’s sugar production in the 2025-26 season is now estimated to be 306 lakh tonnes, way below the initial projection of 343 lakh tonnes. That’s a 12 per cent drop. The latest official assessment suggests that opening stocks for the next season could fall to 33-34 lakh tonnes, compared with 50 lakh tonnes a year earlier.

Also Read: How ethanol push turned India from sugar exporter to importer

For the second year running, the country’s sugar production has been below par.

A big reason for this drop is last year’s extreme rain events in the sugarcane growing regions of Maharashtra, Karnataka and Uttar Pradesh — three........

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