India’s Sugar Export Ban May No Longer Be Just About Sugar

The government’s move to suspend sugar exports suggests the country’s sugar policy is increasingly being shaped not merely by domestic sugar availability, but by concerns around ethanol security, inflation risks and broader macroeconomic pressures. That, at least, is what the cane-sugar arithmetic suggests.

On May 13, the government suspended exports of all categories of sugar — raw, white and refined — until September 2026, reversing its earlier decisions in November 2025 and February 2026 that had together allowed exports of 2 million metric tonnes.

It is unclear whether the decision was linked to rising concerns over inflation driven by higher energy prices, rupee depreciation and the looming threat of El Niño during the past two months.

Actual sugar production during sugar year 2025-26, after taking into account diversion for ethanol, is now projected at 28 million tonnes, lower than the initial optimistic estimate. Consumption is estimated at about 28.5 million tonnes, leaving inventory levels at an uncomfortable 4 million tonnes.

However, lower sugar production raises doubts about the correctness of the Agriculture Ministry’s second advance estimate for 2025-26 released on March 10, which placed sugarcane production at a record high of 500 million tonnes, up from 455 million tonnes in the previous year. At such production levels, the country should technically be facing a sugar glut.

Higher crude oil prices encourage greater diversion of feedstock, including sugar and maize for ethanol and vegetable oil for biodiesel. This has resulted in a rise in feedstock prices. Exports would mean disappearance from the domestic market and correspondingly lower availability for ethanol production.

This also suggests the government is prioritising biofuels over export earnings.

India is the world’s second-largest producer of sugar after Brazil. India’s production and trade policies impact global market prices. Unsteady export policies erode India’s credibility as a reliable supplier and alienate traditional overseas buyers.

Be that as it may, policy flip-flops are not unusual in the sugar sector. In December 2023, the government suspended sugarcane diversion for ethanol citing tight sugar supplies. By late 2025, however, the suspension was revoked and ethanol production from sugarcane juice and molasses was permitted without any quantitative restriction for the 2025-26 season starting Nov. 1, 2025.

What emerges from these unsteady policies is the limited role of market intelligence within policymaking circles. The government’s production data are often suspect and its market outlook is rather limited. There is a strong need to strengthen “soft infrastructure” covering accurate or near-accurate estimation of production and consumption data, as well as the study of global and domestic market drivers and dynamics. Reading market signals and forecasting is a combination of art, science and experience. This is where stakeholder consultation would be useful.