The government on Friday rejected claims that ethanol production was driving the recent surge in sugar prices.
While around ₹ 14,600 crore in subsidies was provided to the sugar industry between 2014 and 2021, no such subsidy has been announced since 2021-22.
“It is incorrect to attribute the recent increase in sugar prices to diversion of sugar for ethanol production,” the Ministry of Consumer Affairs, Food & Public Distribution said in a statement. It also said stronger finances have reduced sugar mills’ dependence on government support.
During surplus years, excess stocks can lock up funds with mills and delay payments to sugarcane farmers. They do not even know what decisions they are taking and what their consequences will be. They diverted sugarcane cultivation towards ethanol production and started blending ethanol with petrol.
The share of sugar diverted for ethanol production fell from around 12% in 2022-23 to around 9% in 2025-26, according to the government. The global sugar deficit for 2026-27 is estimated at around 33 LMT, while weather-related concerns have further weakened the outlook. International sugar prices rose from $474 per tonne on June 30, 2026, to $552 per tonne on August 20, 2026, marking an increase of more than 16% in less than two months. India typically produces around 320-340 LMT of sugar annually, against domestic consumption of approximately 280-290 LMT. As on 20 August 2026, 97% of sugarcane dues for the 2025-26 sugar season have already been paid to farmers. Earlier reporting noted: AAP targets Centre over spike in sugar prices The Aam Aadmi Party (AAP) on Thursday (August 20, 2026) attacked the Central Government for the sharp rise in sugar prices across the country. AAP convenor Arvind Kejriwal claimed that diverting sugarcane towards ethanol production reduced sugar output, pushing sugar prices up by 20 per kg in just 17 days.
It also said nearly three-fourths of the ethanol produced in the country now comes from grains, particularly maize. The government said the price rise is also part of a wider global trend, with tightening supplies affecting sugar markets internationally. Defending the ethanol programme, the Centre said it has helped address the problem of surplus sugar production while improving the financial health of sugar mills. The government said diverting surplus sugar towards ethanol has helped ease this structural issue. Kejriwal said, “It seems as if the Modi government is made up of completely uneducated people. Earlier reporting noted: Arvind Kejriwal claimed that the BJP had said this would save petrol and foreign exchange, which we spend on importing oil from other countries.
Earlier reporting noted: In a video message, Mr.
“The present increase in sugar prices is due to a combination of factors, including lower-than-expected domestic production, increased demand ahead of the festive season, weather-related damage to the sugarcane crop, tightening global sugar supplies and speculation and hoarding by some sections of the industry,” the statement added.
