With sugar prices spiking to Rs 65 a kilo in parts of the country, sugar and sweets could soon become unaffordable for the common Indian in Amrit Kaal. Ironically, this surge in sugar prices comes in a year when India has recorded 500 million metric tonnes (MMT) of sugarcane production in 2025–26, roughly 43% higher than national production in 2015–16.Policymakers even allowed sugar exports in 2025, citing large sugarcane production. But does higher sugarcane production necessarily lead to more sugar? If so, why are prices rising? What is the elephant in the room – the ethanol push, hoarding, untimely exports, inaccurate estimates or a mismanaged sugar policy?To begin, let us understand the fundamentals of the sugarcane economy. Sugarcane, a water-intensive crop, needs at least 10–12 months to reach maturity in North India and can take up to 15 months in South India.Traditionally, sugarcane is harvested between Diwali and Holi and immediately transported to sugar mills. It does not have a long shelf life and begins to lose its sugar content if left outside for more than 15 days. Farmers therefore rush to sugar mills, where sugarcane is crushed and processed to produce industrial sugar, ethanol and other products. Traditional khandsari units convert sugarcane juice into unrefined boora, shakkar and jaggery.The farmer’s role is largely completed by April, when sugarcane is sold to industrial units. From there onwards, sugar mills control much of the production and supply chain.Sugarcane juice can be processed into refined sugar, traditional unrefined sugar, or products such as ethanol and alcohol. These products then move through traders and eventually reach consumers. Because sugar is vital to food security, it is regulated by the government under the Essential Commodities Act, 1955.It is also important to note that the government announces a fixed price for sugarcane.So, the question is: How can a government-regulated food commodity experience a price increase of between 20% and 35%?If we examine the performance of the last two years – 2023–24 and 2024–25 – we find that both recorded lower sugarcane production than the current cycle.In May 2026, the government introduced a sugarcane control order, which many believed restricted traditional khandsari units and encouraged greater diversion of sugarcane towards ethanol. However, the official government position is that “it’s incorrect to attribute the recent increase in sugar prices to diversion of sugar for ethanol production”.The government has identified “lower estimates”, “red rot and top borer disease in sugarcane” and “waterlogging caused by excess rainfall” as key factors behind the price rise.Officially, the government also says that “despite the lower than estimated production, adequate sugar stocks are available in the country to meet domestic demand until the new crushing season begins in October”.Why price hike when stocks are adequate?This raises a question: Why has there been such an abnormal price spike if adequate stocks are available?When we spoke with people within the sugar economy, the picture began to become clearer.They point out that sugarcane farmers, having harvested their crop and sold it to sugar mills during the crushing season, are, by April, either waiting for outstanding dues or already compensated for their sugarcane deliveries.“So how is this price rise going to bring us profits,” asks Yudhvir Singh of the Bharatiya Kisan Union (Tikait), adding, “It is the hoarders of sugar who are profiting from it.”Singh also points out that there is no shortage of sugar in the country, since supplies remain constant in the market, even though it is selling at Rs 65–70 a kilo. The inference is clear: once the farmer sells the sugarcane, prices are determined by how stocks are being managed and released by traders.“If the government wants, it can use its agencies to identify hoarders and release stocks into the market. There is also reserve stock with the government, since sugar is an essential commodity,” said Singh. What he means is, sugar is available, but prices are rising because the supply is insufficient to meet demand at the previous prices.Last month, the government ordered dealers to limit stockholding to 30 days. As per Yudhvir, it needs to do more to manage the situation.“What really happened is that the government miscalculated sugarcane production and diverted excess stock towards ethanol production. Now, it is trying to make amends. As a result, it is turning to sugar imports, further hurting farmers.”In Madhya Pradesh, where Chief Minister Mohan Yadav recently addressed farmers and cooperatives, Aditya Veer Singh, a 36-year-old member of the Naval Singh Cooperative Sugar Factory, said, “Globally, all the major sugar producers, such as Brazil, have turned towards ethanol production, leading to a shortage of sugar. We are also experiencing the effects of El Niño, which is affecting many of the world’s major sugar-producing regions, including India.”Speaking about the link with ethanol, Singh said, “The sugar industry in northern India has been struggling to pay farmers their dues. Payments are often made over 15–18 months. Ethanol production is therefore a boon for them. The price of sugar has jumped because more sugarcane is being converted into ethanol.”Many older sugar plants (especially in parts of Uttar Pradesh), have reported a new phase of economic revitalisation because ethanol production increased by 23% from 2024–25 to 2.23 billion litres.However, this does not mean that Uttar Pradesh is growing additional quantities of sugarcane. In fact, India’s sugarcane production was lower in each of the previous two years than the 500 MMT recorded in 2025–26.So, is diversion for ethanol production the culprit? Yogesh Mathur, an experienced professional in the distillation and ethanol industry, brings a completely new perspective to the issue. He says, “Higher prices for sugar and ethanol mean more profits for us. However, I had to shut operations after producing five lakh litres [of ethanol] this season because prices have crashed,” he said.When sugarcane juice or other sugar-sector feedstocks are directed towards ethanol, the amount of sugar that could otherwise be produced may be reduced.However, the precise impact depends on the feedstock used. Ethanol can be produced from sugarcane juice, B-heavy molasses, C-heavy molasses and other sources.Mathur explains that he cost of producing ethanol from molasses, including C-heavy molasses, is around Rs 51 a litre, after subsidies. “Gadkari-ji [Union minister of road transport] had assured us that the government would buy every last drop [of ethanol] from us. But now there is overproduction, and we are selling our stock for Rs 48 a litre in the open market. Meanwhile, imports from Brazil and synthetic chemicals are arriving at Rs 41–45 a litre. So how can the industry prosper?” Mathur said.He felt that the government was failing to fulfil its promises. As more licences are issued to ethanol plants, he argued, competition for sugarcane would intensify, even as the ethanol industry is already facing a deep crisis.Dhruv, who runs a grain-based ethanol plant in Bhilwara, Rajasthan, said, “Grain-based ethanol production has nothing to do with the sugarcane economy. The government has been gradually shifting towards procuring more grain-based ethanol. Hopefully, there will be more opportunities and quotas in the coming years.”He said that “the current price surge is because of excessive hoarding of sugar and not because of ethanol production”.In a recent press statement, the government said that “sugar diverted to ethanol production fell from 12% in 2022–23 to around 9% in 2025–26.” It further assured the public that “nearly three-fourths of India’s ethanol now comes from grains, particularly maize.”But if we accept these figures at face value, one might ask why the current crisis emerged in the first place.Agri-economist Sukhpal Singh explained that the government has encouraged sugar exports in recent years. There have also been high state-advised prices (SAPs) across states, which were much higher than the fair and remunerative price (FRP) for sugarcane. Furthermore, he says, about 10% of sugarcane production has gone towards ethanol production.“Expected lower production and lower stocks this year, along with the late permission for only one million tonnes of raw, rather than refined, duty-free sugar imports have also contributed to price expectations. All these factors have led to a shortage of sugar and high sugar prices ahead of the festive season, when consumption is high,” he said.For Sukhpal Singh, the current situation is a “policy failure”, especially since it is unfolding in a highly government-controlled sector, where the government determines production and availability through fixed cane prices, mill licensing, minimum sale prices for mills and regulations governing sugarcane use for ethanol, while it also manages consumption through distribution controls.“There is a political economy of sugar in India where a small percentage of relatively larger farmers grow sugarcane, private and cooperative players largely dominate sugar production and the government micromanages the sector. Meanwhile, traditional and healthier alternatives to sugar are being discouraged and marginalised,” he says.Finally, it is the consumers who pay for the consequences of policy decisions.Food price inflation in sugar may be a consequence of mismanaged sugar policy, because the apparent disconnect between government figures and soaring prices raises questions about the effectiveness of the current policy framework.The question remains: Has India’s sugar policy created the conditions for its next crisis?Indra Shekhar Singh is an independent agri-policy analyst and writer.