The government’s decision to cap sugar inventories of bulk industrial users to 15 days is facing pushback from food processors, who say the move could disrupt production without addressing the bigger reason behind the recent price surge—the diversion of sugarcane towards ethanol production.
The government on Thursday said bulk consumers using 10 tonnes or more of sugar a month will be allowed to hold stocks equivalent to only 15 days of their requirements from 1 September to 30 November. The move is aimed at releasing stocks into the market and curbing prices.
Food companies typically maintain at least a month’s inventory of sugar, industry executives said, making the new limit a significant operational constraint.
Supply Chain Risks
“This is not beneficial to food companies who require sugar for their products from syrups to juices, soft drinks to biscuits and other products. You need to keep adequate stocks for at least a month because cutting it to 15 days would leave manufacturers vulnerable to supply disrruptions,” Raghav Jadli, president of the All India Food Processors’ Association, an apex body of food companies which includes Haldiram’s, Marico, ITC, PepsiCo and DFM Foods among others, said.
Sugar stocks surged following the announcement on Thursday. Balrampur Chini Mills and Bannari Amman Sugars jumped 17.78% and 16.87%, respectively, on the BSE. Bajaj Hindusthan Sugar rose 14.96%, while Shree Renuka Sugar gained 7.92% and Triveni Engineering was up 3.53%.
The average retail price of sugar stood at Rs 54.06 a kg on Thursday, up 17% from a year earlier and 13% over the past month, according to the Department of Consumer Affairs’ price monitoring cell.
“Not only is it not beneficial to the industry, it is not beneficial to the consumer too,” Jadli said, warning the move could trigger disruptions and panic buying among consumers of food products. “Sugar is one of the key ingredients in the food industry. So, there will be an impact on production,” he added.
Enforcement Concerns
A chief executive of a top food company, who declined to be named, questioned whether the government has the infrastructure to enforce the new limit effectively.
“The notification is not practical from an implementation perspective because sugar stocks are held across dealers and warehouses, making it difficult to monitor at the ground level,” he said.
The executive also added that the government should focus on the diversion of sugarcane towards ethanol, which is tightening supplies available for food and other industrial uses.
The latest intervention comes as the sugar industry expects the 2026-27 season to begin with lower opening stocks. The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) expects opening stocks at around 3.5-4 million tonnes (MT), against 5 MT on 1 October 2025.
India consumes around 28 MT of sugar annually. Industry sources have also flagged lower cane yields following the early onset of flowering in key producing regions of Maharashtra and Karnataka.
The government had last month imposed stock limits on sugar dealers from 1 August to 30 November to curb hoarding and speculative trading. The latest order extends the restrictions to large institutional and industrial consumers, including confectionery makers, soft drink manufacturers, food processors and sweetmeat sellers.
The food industry, however, says legitimate users should not be penalised.