At the outset of India’s 2025–26 sugar season, expectations were soaring: with the government and industry forecasting a surplus, exporters pressed for permission to send more sugar abroad. Seven months later, India now faces a sharp shortage, with prices spiking dramatically just weeks before major festivals.
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## Early optimism: How surplus was projected
– In July 2025, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) released its initial estimate: gross sugar production for 2025–26 was projected to reach **34.90 million tonnes (MT)**—an 18.3% increase from the previous year’s 29.6 MT.
– Diverting sugarcane for ethanol was expected to drop, meaning more sugar would be available for food consumption. High production forecasts prompted the government to allow higher exports early in the season—1.5 MT in November and another 0.5 MT in February—compared to delayed approval in the previous season.
These projections led regulators and industry chiefs to believe India would comfortably meet domestic demand while also supplying the global market.
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## The reversal: From surplus to shortage
### Downward revisions in production
– In November 2025, ISMA revised its gross output estimate to **34.35 MT**. After accounting for nearly 3.4 MT diverted to ethanol, net supply for food was projected at 31 MT. With opening stocks around 5 MT, availability looked strong against consumption of 28.5 MT.
– By February, the estimate fell further to **32.4 MT** gross with net production cut to 29.3 MT; estimates of sugar diverted to ethanol also revised.
– In April, expectations slipped to **32 MT**, and the government’s official projection for the season’s end stood at **30.6 MT**. After accounting for exports and ethanol diversion, usable sugar dropped to **26.9 MT**, below consumption projections of **28.5 MT**.
### Contributing factors: Crop distress, weather, and yield dips
– Major producing states like **Maharashtra** and **Karnataka** saw declines in agricultural yields, affected by Red Rot and Top Borer disease. Excess rainfall led to waterlogging that further damaged crops.
– All India Sugar Trade Association (AISTA) in early March estimated net sugar production at just **28.3 MT**, excluding ethanol diversion—almost 3 MT lower than earlier expectations.
Together, these factors turned an anticipated abundance into a looming supply crunch.
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## Price surge and government interventions
– By early August, ex-mill prices in Maharashtra and Uttar Pradesh hovered at **₹4,880–4,980 per 100 kg**. By mid-August, they breached **₹5,350**, and within days Uttar Pradesh saw prices of **₹5,850**—a sharp climb from **₹4,830** only a week earlier.
– In response, authorities imposed tighter limits on stockholding for large industrial buyers, restricting them to hold only **15 days’ worth** of sugar requirement starting September. On August 20, India dismantled its 100% import tariff and permitted imports of **1 MT** of sugar—the first import opening in nearly a decade.
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## The ethanol policy paradox
– Initially, the ethanol program was expected to absorb **4.5–5 MT** of sugar equivalent. But oil marketing companies allocated sugar-based ethanol at just **2.9 billion litres**. That sized the estimated diversion at **around 3 MT**, slightly ahead of later projections.
– Though less sugar diverted for ethanol ought to leave more for food, the reduced output meant even this lower diversion came at a cost. The government maintains ethanol was not the trigger for the price spike, attributing the surge instead to weaker production, high festive demand, weather damage, and market behavior.
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## Historical context: Unprecedented pricing
– In recent decades, similar tightness in supply was seen only in **2009–10** and **2016–17**. In February 2017, wholesale 100 kg of sugar fetched **₹4,080–4,180**; in 2009 monsoon failure led to prices around **₹4,400**.
– Closing stocks last year stood at about **3.22 MT**, forcing India to import over **4 MT** of raw sugar in 2009–10. This year’s carry-over stocks are estimated near **3.2 MT**, the lowest in almost twenty years.
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## Looking ahead: Risks for the 2026–27 season
– The **stock-to-use ratio**, currently around **11%**, remains well below the comfortable levels seen during past low-stock seasons.
– Key growing areas face meteorological risks: Maharashtra and Karnataka—which together contribute close to half the nation’s production—report low reservoir levels. Eastern Uttar Pradesh and Bihar also show rainfall deficits. An El Niño pattern threatens hotter, drier conditions. Skymet forecasts rainfall shortage in September, heightening concerns.
– If production dips as predicted—possibly to around **29 MT**—it may just meet domestic consumption of **≈29 million tonnes**. That leaves little buffer for unforeseen demand surges or supply disruptions.
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The sugar season of 2025–26 has thus unravelled fast: from surplus expectations to acute shortage. Government and industry decisions made under optimistic forecasts have left the country exposed to price volatility and supply risk just ahead of major festivals. With the next season already shaping up with signs of stress, consumers and farmers alike brace for continued uncertainty.
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