Government Orders Physical Verification of Sugar Stocks as Prices Surge; Stock Limits Under Consideration

Alarmed by the sharp rise in sugar prices and growing concerns over domestic supplies, the Central Government has ordered a nationwide physical verification of sugar stocks held by sugar mills. The Food Ministry is also considering imposing stock limits on sugar traders and other market participants to curb further price increases, according to sources.

The Directorate of Sugar and Vegetable Oil, under the Department of Food and Public Distribution, has directed all sugar mills to facilitate physical verification of sugar stocks between August 1 and August 14, 2026. The exercise will be conducted jointly by officials of the Directorate and State Sugar and Cane Commissioners.

The move comes as ex-mill sugar prices have risen by nearly 15 per cent over the past month, raising concerns over inflation and the availability of sugar ahead of the festive season.

Ex-mill prices of M-grade sugar in Uttar Pradesh have increased to Rs. 4,450-4,550 per quintal, while S-grade sugar in Maharashtra and Karnataka is trading at Rs. 4,200-4,300 per quintal. Wholesale sugar prices in Delhi have risen to around Rs. 4,750 per quintal.

Discrepancies to Invite Legal Action

According to the directive issued on July 24, any mismatch between the stock reported by a mill and the physical stock found during inspection will be treated as a violation of the Sugar Control Order, 2025. Action will be initiated against the concerned mill under the Essential Commodities Act, 1955, along with other applicable legal provisions.

Sugar mills have been instructed to ensure that their sales registers and all relevant records are updated accurately so that physical stocks can be reconciled with official records during the inspection.

The Directorate has said that the sugar stock reported in the June 2026 P-2 return will serve as the base for verification. Sugar sold or dispatched during July will be adjusted before determining the actual stock available at the mill on the date of inspection.

The government will also validate July sales reported by mills with the corresponding GST sales data. Any discrepancy may lead to denial of the domestic sugar sales quota for October 2026 and other action under the applicable laws.

Government Weighing Stock Limits

The Food Ministry held discussions with representatives of the sugar industry last week to review the sharp increase in sugar prices.

According to sources, one of the key suggestions discussed was the imposition of stock limits on sugar to discourage hoarding and speculative trading. The proposal is currently under active consideration, although no final decision has been taken.

Sugar prices have climbed steadily over the past month across major producing and consuming regions.

Production Below Consumption 

Industry estimates suggest that India's sugar production during the 2025-26 sugar season will be around 27.9 million tonnes, while domestic consumption is expected to reach approximately 28.5 million tonnes. This will mark the second consecutive year in which production has fallen short of consumption.

At the start of the season, the industry had projected sugar output at around 30.9 million tonnes. However, weaker monsoon conditions and lower sugarcane productivity significantly reduced production. Uttar Pradesh recorded its lowest sugar output in nearly a decade, while Maharashtra also produced less than initially expected.

Exports Despite Lower Production

Despite lower production prospects, the government allowed the export of 1.5 million tonnes of sugar in December 2025, followed by an additional 0.5 million tonnes in February 2026. Although sugar exports were banned in May 2026, nearly 0.8 million tonnes had already been shipped.

Lower production, exports and continued diversion of sugarcane towards ethanol have reduced inventories, particularly in Maharashtra and Karnataka, adding to the upward pressure on prices.

Industry estimates indicate that India's opening sugar stock on October 1, 2026, could fall to 3.3-3.5 million tonnes, one of the lowest levels in several decades.

If crushing operations are delayed at the beginning of the new sugar season, sugar availability during October and November could tighten further, increasing the risk of another round of price increases during the festive period.