The 37-Lakh-Tonne Number That Makes "Festive Demand" a Bad Excuse

The Gap That Actually Explains This Spike Isn't Between Supply and Demand

• It's Between Two Numbers From the Same Ministry Start with the number everyone's felt: sugar at ₹65.05 a kilogram, up 41% from a year ago. Now zoom to the number that actually explains it: India's 2025-26 sugar production was initially estimated at around 343 lakh tonnes. Actual output came in around 306 lakh tonnes - a 37-lakh-tonne miss. That gap isn't a mid-season surprise; it's the accumulated distance between an early, optimistic estimate and a harvest shaped by weather stress in Uttar Pradesh and Maharashtra, the two states producing 71% of India's cane. Export permissions and ethanol-diversion targets were set against the optimistic 343-lakh-tonne figure - meaning the policy machinery was allocating supply that didn't actually exist by the time crushing was complete.

Who Absorbs a Forecasting Miss First Here's the

mechanism the "festive demand" explanation skips: when export and ethanol targets get set against an inflated production estimate and actual output undershoots, domestic retail supply tightens precisely because too much of the smaller-than-expected crop was already committed elsewhere.

That tightening doesn't hit every household equally - it hits hardest wherever retail margins are thinnest and substitution options are fewest, which in practice means lower-income urban consumers who can't shift consumption the way a bulk institutional buyer can.

The government's response - allowing 10 lakh tonnes of duty-free imports, the first such move in a decade - treats the symptom, months after the FAO's July Sugar Price Index reading (up 5.6%, flagging tightening global supply, including a weaker Brazilian crop) had already signalled the direction this was heading.

Why "Unforeseeable" Doesn't Hold Up Kunal

Munjal's point - that the real issue was the gap between production estimates and actual production, not ethanol diversion in the short term - is the detail that survives scrutiny. A model built on maize increasingly replacing sugarcane as ethanol feedstock and the absence of a comparable price surge in years of heavier sugar-based ethanol dependence, both suggest ethanol diversion isn't the primary driver this cycle.

What is: a policy apparatus that set trade and diversion targets on a production estimate that field-level data, by mid-season, should have already been correcting. For the exam, the real insight is this: food inflation isn't only a supply-and-demand story - it's frequently a data-governance story, where the actual failure is a policy system that commits supply based on projections rather than continuously updating those commitments as ground-level crushing data comes in through the season.