New Delhi, Aug 24 — The recent rise in sugar prices is being driven primarily by market sentiment and expectations around the next sugarcane crop rather than diversion of sugarcane for ethanol production, Grain Ethanol Manufacturers Association (GEMA) said on Monday.
Speaking to IANS about concerns that ethanol production may have reduced sugar availability and contributed to higher prices, Dr C.K. Jain, President, said ethanol diversion should not be blamed for the current rise in sugar prices.
He said the key factor to watch is the ex-mill price and the markup over it, adding that a high market markup indicates that sentiment is playing a major role.
“Ethanol production is no factor in the rise in sugar prices. The sugar price in the market is totally sentimental,” Jain said.
Jain said GEMA “100 per cent” agrees with the government’s assessment that ethanol production should not be held responsible for the increase in sugar prices. He pointed out that the decision regarding diversion for ethanol during the ethanol supply year 2025-26 was taken in September 2025, when it was expected that around 30 lakh tonnes of sugar would otherwise have gone into storage and could instead be converted into fuel.
According to Jain, subsequent factors such as excessive rainfall, red rot disease in sugarcane and waterlogging affected sugarcane and sugar production to some extent. However, he said the reduction has not been severe enough to create an actual shortage of sugar in the market.
“Even today, there is enough stock in the sugar mills, enough stocks,” Jain said, adding that mills are also expected to begin operations from October 15.
He said sugar prices are ultimately linked to the price paid to farmers for sugarcane. With the government increasing the Fair and Remunerative Price (FRP) for sugarcane every year, the cost of raw material for sugar mills continues to rise, while the Minimum Selling Price (MSP) of sugar has not been increased for the last eight years.
“This is the anomaly in our system which needs to be rectified,” Jain said.
Jain stressed that the interests of farmers, sugar mills and consumers have to be balanced.