New Delhi, Aug. 21 -- India's push for greater ethanol in fuel blends could have an unanticipated casualty: prices of food items that use sugar as an input. As domestic demand for sugarcane-from which much ethanol is derived-has grown, supplies seem to have fallen short, as reflected in this month's rising market prices of sugar, which is overwhelmingly made from cane in India.

For this year's upcoming season, the government had raised cane's support price in May by nearly 3%. Whether that gets a supply response will not be known for some time, but a sugar scarcity is evident.

The government has imposed limits on the sugar stocks that bulk buyers can hold. It reportedly also has imports under consideration. If the sweetener is shipped i...