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Speculation and Bulk Hoarding Fuel Unnatural Sugar Price Spike, Says ISMA

Retail sugar prices across India have surged by 29 percent over the past month, but the Indian Sugar Mills Association (ISMA) has clarified that this rise is not driven by an actual domestic shortfall. Instead, the industry apex body attributes the sharp price jump to speculative trading and advance inventory accumulation by bulk commercial consumers, which created an artificial tightness in the marketplace.

What Happened

Average all-India retail sugar rates reached Rs 63 per kilogram on Monday, marking a substantial climb from Rs 48.7 per kilogram recorded one month prior. In response to the market movement, ISMA stated that the surge is unnatural because adequate supplies remain in the country.

ISMA President Niraj Shirgaokar explained that a segment of traders generated a misleading impression of supply shortages. Consequently, industrial and bulk consumers who traditionally purchase on a just-in-time basis responded by procuring 1.5 to 2 months of inventory in advance. This aggressive stocking drew physical sugar out of regular circulation and stored it in private warehouses, creating an artificial supply squeeze in spot markets.

ISMA representatives also noted other secondary contributors to the price movement, including weather disruptions, pest attacks on crops, and total production volumes that finished lower than earlier projections. During this period, ex-mill prices climbed to peaks of Rs 58 to Rs 59 per kilogram before starting to decline.

Key Highlights

  • Average domestic retail sugar prices increased by 29 percent within a month, rising from Rs 48.7 to Rs 63 per kilogram.
  • ISMA confirmed that there is no actual supply shortage, projecting a closing buffer stock of approximately 35 lakh tonnes by the end of September.
  • Bulk purchasers withdrew sugar from circulation by stocking supplies 1.5 to 2 months ahead of standard procurement schedules.
  • The industry dismissed claims that ethanol diversion caused the price rise, noting that only 290 crore litres out of a total 1,200 crore litres of ethanol came from sugar during the current supply cycle (October 2025 to September 2026).
  • Ex-mill prices peaked between Rs 58 and Rs 59 per kilogram and are currently cooling down, with retail adjustments expected to follow.
  • Government interventions include duty-free import provisions, tightened stockholding caps, ongoing special crushing operations, and plans for an early commencement of the new crushing season.

Why This Matters

The situation directly impacts retail food costs across households and commercial businesses. Addressing concerns over ethanol policies, ISMA clarified that sugar allocations for ethanol are made strictly after guaranteeing domestic household availability and maintaining a safe opening inventory. Furthermore, a projected closing buffer of roughly 35 lakh tonnes by the end of September is anticipated to adequately cover standard domestic demand.

While the association rejected accusations that the broader milling sector engineered market tightness, it acknowledged that individual mills holding excess stock could not be completely ruled out, an issue currently under government review.

What to Watch Next

Retail prices are expected to rationalize as falling ex-mill rates filter into wholesale and consumer channels. The market will monitor the implementation and impact of government measures, such as duty-free imports, enforcement of stockholding limits, outcomes from special crushing efforts, and the early kickoff of the upcoming sugar production season.

Frequently Asked Questions

Did ethanol production cause the domestic sugar price hike?

According to ISMA, ethanol production was not responsible for the supply tightness. Only 290 crore litres out of a total 1,200 crore litres of ethanol were derived from sugar during the October 2025 to September 2026 ethanol supply year, and allocations occur only after domestic food needs are fully secured.

What is the expected closing stock of sugar?

ISMA projects closing reserves of approximately 35 lakh tonnes at the end of September, which the association identifies as a healthy buffer for regular consumer consumption.

Why did retail prices jump 29 percent in one month?

The price surge from Rs 48.7 to Rs 63 per kilogram was driven primarily by speculative trade talk leading bulk buyers to hoard 1.5 to 2 months of inventory, coupled with localized crop damage from weather, pests, and lower-than-expected output.

Source: Times of India