India’s homemakers are bracing for a difficult period as sugar prices are expected to increase in the coming days. The Union Cabinet recently approved a proposal to hike the price of ethanol derived from C-Heavy Molasses. This move is expected to directly impact sugar prices, with production of the commodity also likely to be affected due to the government’s decision, according to industry trade bodies.
Currently, the wholesale price of sugar ranges between Rs 3660 and Rs 3750 per quintal. Shankar Thakkar, National President of the All India Edible Oils Traders Federation and National Minister of the Confederation of All India Traders (CAIT), warns that there could be a rise of at least 15% in sugar prices in the near future.
Sugar Production Set to Decline by 16.9% in 2024-25 Season
Thakkar expressed concern over the sugar industry’s outlook, with estimates indicating that sugar production in the 2024-25 season could fall to 26.52 million tons, a 16.9% decline from last year’s projected 31.9 million tons. Factors such as dry weather, the spread of red rot disease in Uttar Pradesh, and flooding in the eastern regions have already affected sugarcane yields and sugar recovery.
Rising Sugar Prices and Shrinking Availability
Total sugar production for the same period stands at 13.06 million tons, marking a 13.65% decrease from last year. The trade body expects a rise of up to 15% in the wholesale price of sugar, with retail prices likely to increase even more.
The trade body’s figures also suggest that the domestic availability of sugar will be lower this season, with a carryover stock for the 2023-24 season estimated at 7.98 million tons. At the same time, sugar consumption is expected to reach 29 million tons, which could strain the market, especially during the high-demand festive season.
Criticism of Ethanol Price Hike
Thakkar has criticized the government’s decision to increase ethanol prices, warning that it will divert more sugarcane to ethanol production at a time when sugar production is already on the decline. He cautions that if ethanol prices remain uncompetitive with crude oil, the government may face significant financial losses, especially when blending ethanol with petroleum products.
Impact on Ethanol and Sugar Prices
Trade body estimates indicate that ethanol production, which uses sucrose from sugarcane, will reach about 4 million metric tons this season. Thakkar believes the combination of reduced sugar production and rising ethanol prices will push sugar prices higher, impacting consumers and the industry at large.
Sugarcane Crushing Declines
The National Federation of Cooperative Sugar Factories (NFCSF) has reported a decrease in the crushing of sugarcane, with approximately 148.21 million tons processed between October 1, 2024, and January 15, 2025. This marks an 8% decline compared to last year’s 161.28 million tons.
As India’s sugar industry faces these challenges, experts are urging the government to reconsider its ethanol price hike, fearing further complications for both the sugar and ethanol sectors.