Sugar Crisis: Policy Failures, Faulty Estimates and the Cost of Ignoring Research

The sharp rise in sugar prices across India over the past month and a half has taken the debate beyond whether prices are increasing. The only question now appears to be how many new records sugar prices will set before the situation stabilises.

What is important, however, is that farmers are not responsible for the weak sugar stocks and the decline in production that have led to the current crisis. The government should not hesitate to accept responsibility for a situation that was shaped by flawed production estimates, weak monitoring, poor research for new varieties and delayed policy responses.

In Uttar Pradesh, India’s largest sugarcane-producing state, farmers have been suffering for nearly five years while waiting for a viable replacement for the once highly productive Co 0238 variety. At the same time, the Ministry of Agriculture has continued to release record estimates for sugarcane production.

On the other hand, the Ministry of Consumer Affairs, Food and Public Distribution, which takes key decisions related to sugar, appears to have remained unaware of the extent to which actual sugar production was falling. The estimates reaching policymakers were far removed from the situation on the ground.

As a result, until the government imposed a ban on sugar exports on May 13, 2026, policy decisions continued to be based on projections of surplus sugar production.

The Gap Between Production Estimates and Reality

During the current 2025–26 sugar season, running from October 1, 2025 to September 30, 2026, the sugar industry initially projected a bumper crop.

Gross sugar production, including the quantity diverted for ethanol production, was estimated at around 349 lakh tonnes. The Ministry of Agriculture's estimates of sugarcane acreage and production were presumably among the factors supporting such optimistic projections.

The Indian Sugar & Bio-energy Manufacturers Association (ISMA) estimated that even after diverting 34 lakh tonnes of sugar towards ethanol, the country would still have around 315 lakh tonnes available for the sugar market. That was approximately 30 lakh tonnes higher than estimated domestic consumption.

In addition, India entered the season with an estimated carryover stock of around 50 lakh tonnes from the 2024–25 season. On paper, therefore, there appeared to be no reason for concern.

The reality turned out to be very different.

Yet the Sugar Directorate and the Department of Food and Public Distribution continued to operate on the basis of these optimistic estimates. This was reflected in the government's decision on November 7, 2025 to permit exports of 15 lakh tonnes of sugar during the current season.

Exports and Ethanol Diversion Added to the Pressure

By January 2026, it had already become increasingly clear that low sugarcane availability could result in sugar production falling significantly below earlier estimates. Reports published by Rural Voice had repeatedly highlighted the emerging concerns.

By the end of February, sugar mills in Maharashtra had begun closing because of inadequate cane availability. Yet, at the same time, the government permitted an additional five lakh tonnes of sugar exports on February 13, 2026, taking the total export quota to 20 lakh tonnes.

The decision reflected the extent to which policy continued to rely on earlier projections rather than changing conditions on the ground.

Since the government expected a comfortable sugar surplus, production of ethanol from sugarcane juice and B-heavy molasses also continued. However, with higher sugar prices offering better returns, several mills were less aggressive in diverting sugar towards ethanol.

As a result, against the initial estimate of 34 lakh tonnes, around 30 lakh tonnes of sugar was eventually diverted for ethanol production.

The bigger problem, however, was the collapse in actual sugar production.

Against an estimated net sugar production of 315 lakh tonnes, actual production was limited to around 279 lakh tonnes.

The numbers make the situation clearer. India produced around 279 lakh tonnes of sugar during the season. Although the carryover stock from the previous season was estimated at 50 lakh tonnes, only around 48 lakh tonnes was effectively available for use.

This meant that the country's total sugar availability for the season stood at around 327 lakh tonnes.

Record-Low Sugar Stocks

Of this total, around eight lakh tonnes of sugar were exported. Although the government had permitted exports of up to 20 lakh tonnes, actual exports remained lower because international prices were not sufficiently attractive.

The implications could have been far more serious had the entire export quota been utilised.

The government finally imposed a ban on sugar exports on May 13. By then, the significant gap between production estimates and actual output had already become evident.

The timing raises serious questions about the government's ability to monitor sugar production and availability in real time. It suggests that policymakers lacked a sufficiently robust and reliable mechanism to track changes in production before making decisions on exports.

After accounting for exports of around eight lakh tonnes, India's available sugar stock stood at approximately 319 lakh tonnes.

With domestic consumption estimated at around 285 lakh tonnes, the country is expected to end the current season with a closing stock of only around 34 lakh tonnes.

That would be among the lowest closing stocks seen in several decades.

Both the sugar industry and the trade had anticipated the possibility of such a sharp decline. Industry sources had expected prices to rise after June.

Ex-mill sugar prices, which were between Rs. 3,900 and Rs. 4,200 per quintal in May and June, began rising sharply from July. Prices have now crossed Rs. 5,700 per quintal in several markets.

The pressure has inevitably been passed on to consumers, with retail prices continuing to move higher.

How Much Relief Will Raw Sugar Imports Provide?

The government has now stepped in with emergency measures.

After imposing stock limits on sugar, the Ministry of Consumer Affairs, Food and Public Distribution decided on August 20 to allow duty-free imports of 10 lakh tonnes of raw sugar.

However, the move faces several practical challenges.

The refinery at Kandla primarily caters to exports. For imported raw sugar to provide relief to the domestic market, appropriate permissions would be required to allow refined sugar to be sold within India.

There are also questions about whether operating refineries through sugar mills would be a practical and commercially viable solution.

The benefit of imports will depend significantly on the quality and source of the sugar being purchased. High-seas purchases could potentially reduce delays. Otherwise, considering the transit time required for shipments from Brazil, it may be difficult for imported sugar to reach the domestic market in significant quantities during the peak festive season.

That means the possibility of fresh records in retail sugar prices remains strong.

The Root of the Crisis: Falling Sugarcane Production

The underlying problem is the decline in sugarcane production, but the government still appears reluctant to fully acknowledge the scale of the problem.

Maharashtra and Karnataka had initially been expected to deliver better sugar production this season. However, heavy rainfall in September and October 2025 left sugarcane fields waterlogged for nearly a month in several areas.

The crop did not receive adequate sunlight, affecting photosynthesis and ultimately reducing productivity.

As in the previous year, flowering was also reported in sugarcane crops during January. This resulted in lower sucrose content and further affected sugar recovery.

Even when sugar mills in Maharashtra began shutting down rapidly and less than 60 per cent of the sugarcane production projected in official estimates was reaching mills for crushing, the seriousness of the situation appears to have been underestimated.

Uttar Pradesh Farmers Still Waiting for Better Varieties

The situation in Uttar Pradesh is equally concerning.

For nearly a decade, the Co 0238 variety was one of the main drivers of the state's record sugarcane production. However, the variety has been increasingly affected by disease.

Despite this, the government and agricultural research institutions have failed over the past five to six years to provide farmers with a successful and widely adaptable replacement.

No one appears willing to accept responsibility for this technological and research failure.

The consequences have been borne directly by farmers through lower yields and financial losses.

As a result, sugarcane acreage in Uttar Pradesh has declined, with some farmers shifting towards other crops and land uses, including maize and poplar plantations.

The government also increased sugarcane prices in Uttar Pradesh only after two years during the current season, even as farmers' cultivation costs continued to rise.

This, too, appears to have contributed to a growing loss of interest in sugarcane cultivation.

None of these developments were unknown to policymakers.

India Returns to Sugar Imports After a Decade

The result is that, after growing import dependence in commodities such as edible oils, pulses and cotton, India is now importing sugar again after nearly a decade.

The cost of imported raw sugar after refining is likely to remain close to prevailing domestic prices, while imports of refined sugar would have been even more expensive.

This may explain why the government chose to permit imports of raw sugar instead.

The production situation in the country's major sugar-producing states underlines the scale of the problem.

In the current 2025–26 sugar season, sugar production in Uttar Pradesh fell to around 89.70 lakh tonnes, the lowest level in the state in the past decade.

Sugar mills in Uttar Pradesh crushed approximately 73 lakh tonnes less sugarcane during the current season, while Maharashtra's total sugar production stood at around 99.20 lakh tonnes, significantly below earlier expectations.

El Niño Could Create Fresh Risks

The outlook for the next season also carries significant uncertainty.

If El Niño results in a weaker monsoon, sugarcane production could face further pressure during the 2026–27 season.

Industry experts estimate that, based on sugarcane acreage, crop conditions and the monsoon outlook, India's gross sugar production next season could be around 310 lakh tonnes.

If around 25 lakh tonnes of sugar were diverted towards ethanol production, net sugar production could fall to around 285 lakh tonnes.

However, given the current shortage and high prices, the possibility of significant diversion of sugar towards ethanol in the next season has now become extremely limited.

The central question, therefore, is not simply why sugar prices have reached record levels.

The more important question is why policymakers failed to respond in time despite clear signals from sugarcane fields, mills and sugar production data.

The current crisis is the result of a chain of failures: unrealistic production estimates, continued export permissions despite deteriorating conditions, inadequate monitoring of actual sugar availability, and long-standing weaknesses in sugarcane research.

Unless the government addresses the failure to develop improved and disease-resistant sugarcane varieties and establishes a credible system for monitoring actual crop production, cane availability and sugar stocks in real time, this crisis will not remain a one-season problem.

India's sugar crisis should serve as a warning. Policy decisions based on inaccurate estimates can quickly turn an expected surplus into a shortage, leaving farmers to bear the consequences of failed research and consumers to pay the price of delayed policymaking.