Sugar Price Volatility in India's Food–Energy Nexus: Evidence from Ethanol Blending, Sugarcane Pricing and Climate Factors.
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Abstract
The Indian sugar industry is moving from a food commodity market to an integrated food–energy market with the growing implementation of the Ethanol Blended Petrol (EBP) programme. Price stability for sugar is crucial to the interests of farmers, consumers and industry, but market uncertainty has arisen due to ethanol diversion, climate variability and policy interventions. This analysis uses monthly retail sugar price data for the period June 2016 to May 2026 across three major Indian states, Karnataka, Maharashtra and Uttar Pradesh, to understand seasonal behaviour, volatility dynamics and the drivers of retail sugar price volatility. The methods include analysis of seasonal price trends, Augmented Dickey–Fuller (ADF) and ARCH–LM tests, as well as eGARCH (1,1) models, to estimate the persistence of volatility and asymmetric price responses. The findings show strong volatility persistence and asymmetric effects in Maharashtra and Uttar Pradesh, while price behaviour is comparatively stable in Karnataka. Simultaneously, the effects of ethanol blending percentage, sugarcane Fair and Remunerative Price (FRP), temperature and rainfall were also assessed using a multiple regression model. Ethanol blending has a significant effect on price volatility, while higher FRP has the opposite effect. The findings highlight the importance of balanced food–fuel policies, stable sugarcane pricing mechanisms, and evidence-based market management for improving sugar market stability during India's ongoing food–energy transition.
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