Festive Season Sugar Supply Assured, But Hoarding Questions Remain Unanswered

Even as sugar prices show signs of cooling after government intervention, media reports continue to claim that traders and distributors are hoarding sugar. The Indian Sugar & Bio-Energy Manufacturers Association (ISMA), however, has said it is not aware of the ground reality and cannot confirm whether hoarding is still taking place.

In an exclusive interview with Outlook Business, ISMA Director General Deepak Ballani acknowledged that speculative buying had earlier created artificial tightness in the market. But when asked directly about ongoing hoarding, he said: "I am neither supporting, nor denying. It is the government's job, and they are inspecting. I am not sure what is the ground situation."

His response comes at a time when sugar prices had surged nearly 40% in two months, raising concerns among consumers ahead of the festive season.

Retail prices rose from ₹48.18 per kg on July 20 to ₹55.70 per kg on August 20, according to Consumer Affairs Department data. In some Delhi markets, prices had climbed as high as ₹65-70 per kg.

The government had to step in with stockholding limits, duty-free imports and physical verification of stocks to cool down the market.

What Led To The Price Surge?

Ballani explained that three factors contributed to the initial price rise. First, sugar production in 2025-26 was lower than expected. Red rot disease affected sugarcane crops in Uttar Pradesh, while extended cloud cover in Maharashtra reduced yields.

Second, international prices rose due to dry weather in other sugar-producing countries. The price went from $474 per tonne in June to $552 per tonne in August.

And third, speculative buying by bulk consumers created artificial tightness.

"The perception was created that there is tightness. When that happens, a person who buys one month's stock starts buying two months' stock. He feels that the price will increase, there will be an availability problem, so this cascading effect led to the price increase," Ballani said in the interview.

ISMA President Niraj Shirgaokar had earlier described this as "speculative behaviour" by bulk buyers who started stocking one-and-a-half to two months of supply in advance, pulling sugar out of circulation and creating an "artificial tightness that had nothing to do with actual availability".

ISMA Vice President Madhav B Shriram had also pointed to the impact of red rot disease on sugarcane crops, as per a previous Outlook Business report. He said Trichoderma, a naturally occurring beneficial fungus, can suppress the growth of red rot, although it does not cure the disease. Where red rot is detected, the affected cane is removed and destroyed, along with cane within a surrounding radius. Lime is then applied to the soil to destroy any remaining disease-causing material, after which sugarcane is not planted in the affected area for a year.

Shriram said areas considered prone to red rot have seen disease-susceptible varieties being replaced with varieties Co 0238 (Karan 4) and Co 0118 (also known as Karan 2). He described 238 as a "wonder variety" developed by agricultural scientist Dr Bakshi Ram, saying it helped improve sugar recovery from around 8-12% while increasing sugarcane yield by around 20%.

Government Steps In To Curb Hoarding

As prices continued to rise, the government moved quickly to intervene. It imposed a stockholding limit of 400 tonnes on traders. More significantly, from September 1, bulk consumers using more than 10 tonnes of sugar a month cannot hold more than 15 days of their requirement. Earlier, dealers had been restricted to holding stocks for no more than 30 days.

The government also allowed duty-free imports of up to 1 million tonnes of raw sugar until October 31, the first such move in nearly a decade. Preference will be given to importers able to complete shipments by October 15.

State governments began inspecting godowns to check compliance. Ballani said these measures have already started showing results. Maharashtra ex-mill prices dropped from ₹65 to around ₹52 in 3-4 days, a decline of about 20%. He expects retail prices to follow suit in a few days as the decline trickles down from wholesale to retail markets.

ISMA itself has demanded the stock limit on traders be brought down further to 200 tonnes.

Ballani said, "On the bulk consumer, they said they can't hold the sugar more than 15 days of their consumption. That means there'll be more sugar in the domestic market and not with the bulk consumers or traders. And then now we have also seen in last few days, the state governments have got activated. They are inspecting the godowns. They are actually also going to the mills, traders, all everywhere to make sure that the order of the government is complied with."

Consumers Assured Of Availability

Despite media reports of hoarding, Ballani assured consumers that there will be "absolutely no shortage" of sugar. ISMA estimates closing stock for the season ending September 30 at around 35 lakh tonnes, enough to meet demand through October and part of November. The new crushing season beginning October 15 will bring fresh supplies.

"The import window, stockholding measures and advancement of the crushing season provide multiple levers to manage the temporary firmness we are seeing. With closing stocks estimated at around 35 LMT and fresh-season production being brought forward, we remain confident about domestic availability," Shirgaokar had said.

Ballani said additional sugar will come from multiple sources. The stockholding limit on bulk consumers will take effect from September 1, meaning any bulk consumer holding more than 15 days of stock will have to offload it into the market. The government has also allowed sugar refiners to start selling in the domestic market, which will bring around three to three-and-a-half lakh tonnes of white sugar. Duty-free imports of raw sugar may start arriving from October 15.

"I want to assure all the consumers that there is absolutely no and there'll be absolutely no shortage of sugar. Sugar will be available in plenty ahead and after the festive season," Ballani said.

Notably, ISMA had rejected the argument that ethanol diversion is behind the current price increase. Sugar diversion towards ethanol is planned only after assessing domestic requirements and the overall sugar balance. Grain-based ethanol accounted for 75% of total ethanol supply in 2025-26, while sugar-based ethanol accounted for only 25%.

"The government assesses crop production, domestic sugar requirements and buffer stocks each year before deciding the level of diversion from sugarcane, maize or rice," Ballani had earlier told Outlook Business.

Vijendra Singh, President of the All India Distillers' Association, had earlier said that even if next year's production declines by 1-1.5 million tonnes, the country would not face a shortage. He said the current rise in sugar prices is driven by speculative buying rather than any fundamental shortage.

Ballani expects normalcy to return well before November. "The prices of sugar have already started coming down. It is almost at the level of ₹51-52, which is almost 20% less than 4-5 days...November is too far. I think things will be back on track sooner than that. And in any case, by 15th of October, we will have the new season starting, new sugar will start coming. So things will normalise very fast."

ISMA and sugar mills are also working to advance the 2026-27 crushing season by 10-15 days. Special crushing is already under way in Tamil Nadu and Karnataka, with October production expected to rise to around 10 lakh tonnes, compared with the usual 4 lakh tonnes.