Kejriwal blames ethanol policy for ₹20/kg sugar price surge

The Aam Aadmi Party (AAP) on Thursday (August 20, 2026) launched a scathing attack on the central government, accusing it of causing a sharp spike in sugar prices through its ethanol blending policy. AAP convenor Arvind Kejriwal claimed that the diversion of sugarcane for ethanol production has led to a severe shortage of sugar, pushing prices up by ₹20 per kilogram in just 17 days.

In a video message, Mr. Kejriwal said sugar prices had risen from ₹46 per kg to ₹65 per kg between August 3 and August 20. He argued that the government's decision to promote ethanol blending – encouraged to reduce India's dependence on imported crude oil – went wrong. "By diverting sugarcane towards ethanol production, the country has faced a severe shortage of sugarcane and sugar," he said.

"The ethanol was produced to save foreign exchange spent on oil, and now we will spend that same foreign exchange importing sugar," Mr. Kejriwal added. He also claimed that ethanol-blended petrol is damaging vehicles and reducing fuel mileage, while consumers are forced to pay higher prices for a daily essential.

Mr. Kejriwal did not mince words in his criticism. "It seems as if the Modi government is made up of completely uneducated people. They do not even know what decisions they are taking and what their consequences will be," he said.

The central government has been promoting ethanol blending as a key part of its energy transition strategy. The target for blending ethanol in petrol has been raised from 10% to 20% by 2025-26, a move intended to cut crude oil imports and provide an additional income source for sugarcane farmers. Sugar mills can produce ethanol from sugarcane juice, syrup, and molasses, which is why a larger share of cane going to ethanol can result in lower sugar output.

According to industry analysts, the interplay between sugar production and ethanol is complex. In years of surplus sugarcane, the impact on sugar prices may be minimal; however, when cane output falls due to weather or sowing choices, the competition between sugar and ethanol can become pronounced. In recent months, sugar prices across India have been on the rise, influenced by a mix of domestic production estimates and market sentiment.

The government has not yet issued a response to Mr. Kejriwal's remarks. In the past, Union ministers have defended the ethanol policy as a win-win, arguing that it leads to cleaner fuel, better returns for farmers, and lower pollution. They have also said that sugar prices are determined by supply-demand dynamics and that the government intervenes when necessary by releasing additional sugar in the open market or imposing stock limits to prevent hoarding.

Thursday's attack is part of a broader political dispute over inflation. The AAP, which governs Delhi, has frequently raised the issue of rising consumer prices. The party's criticism echoes similar statements by leaders of the Congress and other opposition parties, who have accused the Union government of failing to control essential commodity prices. With elections in several states due over the next year, the cost of living is likely to remain a volatile political issue.

For ordinary consumers, the immediate concern is the cost of sugar, which is used daily in households, tea stalls, and sweet shops. The price increase has been particularly steep in some states, and merchants say they have no choice but to pass on the rise to customers. The sugar price surge also has a cascading effect on sweets and beverages, which could add to inflationary pressures in the food basket.

This report will be updated with the government's response when it becomes available.