New Delhi, Sept. 3 -- The recent rise in sugar prices from about Rs.45 per kg at the end of July to around Rs.65 per kg at the end of August has put the management of agricultural produce in focus. Initially, this was blamed on the diversion of sugarcane for ethanol production aimed at fuel blending. But this was only part of the reason.

Sugarcane diverted for ethanol has been in the range of 10% of sugar production and accounts for less than one-third of India's ethanol output. A larger share of the ethanol produced now comes from maize and broken rice. In fact, the share of sugarcane in ethanol production has been declining.

The main reason for sugar prices rising is faulty estimation of the sugarcane crop and ad hoc policy measures, ...