New Delhi, August 24: The recent rise in sugar prices has been attributed to market sentiment rather than ethanol production, according to the Grain Ethanol Manufacturers Association (GEMA). The association dismissed claims that the use of sugarcane for ethanol production is responsible for the price hike, stating that uncertainty surrounding the upcoming sugarcane crop is the primary factor.
In an interview with a news agency, GEMA President Dr. C.K. Jain emphasized that ethanol production has not negatively impacted the availability of sugar in the current market. He argued that linking the increase in sugar prices to the ethanol program is misleading.
Dr. Jain explained that understanding the market dynamics requires examining the ex-mill price of sugar and the retail price differences. He noted that when the gap between market prices and ex-mill prices widens, it indicates that prices are more influenced by psychological perceptions and speculation than by actual shortages.
He stated, “There is no correlation between ethanol production and the rise in sugar prices. The prices in the market are entirely sentiment-driven.”
The GEMA president expressed full agreement with the government’s assessment that ethanol production should not be blamed for rising sugar prices. He mentioned that decisions regarding sugarcane usage for ethanol supply in the 2025-26 fiscal year were made in September 2025, with expectations that around 3 million tons of sugar could be stored for ethanol production to meet energy sector demands.
However, subsequent adverse conditions, such as heavy rainfall, red rot disease in sugarcane, and flooding in various regions, have somewhat affected sugarcane and sugar production. Despite this, Dr. Jain asserted that the production shortfall is not significant enough to create a real shortage in the market.
He added, “Sugar mills still have ample stock available. There is no shortage in reserves.”
Furthermore, he noted that most sugar mills are set to commence operations from October 15 with the start of the new crushing season, which will strengthen supply.
Dr. Jain also highlighted the cost structure of the sugar industry, pointing out that sugar prices are directly linked to the Fair and Remunerative Price (FRP) paid to farmers. The government increases the FRP annually, leading to a continuous rise in raw material costs for sugar mills.
In contrast, he noted that the Minimum Selling Price (MSP) of sugar has not been raised in the past eight years, which he considers the biggest discrepancy in the current system.
He remarked, “This is a flaw in our system that needs to be addressed.”
The GEMA president stressed the importance of balancing the interests of farmers, sugar mills, and consumers in policy-making. He emphasized that sugarcane farmers should receive fair prices for their produce, the sugar industry should have the opportunity to remain economically viable, and consumers should have access to sugar at reasonable prices.
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