From inflation fears to weak cane output: The real reasons behind India’s sugar export ban

Rashmi Pandey — Thu, 14 May 2026 05:46:52 +0000

In a decisive move to shield domestic supplies and tame rising food inflation, the Indian government has banned sugar exports till September 30, 2026. The Directorate General of Foreign Trade (DGFT), through a notification issued on May 13, shifted exports of raw sugar, white sugar and refined sugar under ITC(HS) codes 1701 14 90 and 1701 99 90 from the “restricted” category to fully “prohibited” with immediate effect.

The order, however, carves out key exemptions. Sugar exports to the European Union under the CXL tariff rate quota system and shipments to the United States under the Tariff Rate Quota (TRQ) mechanism will continue. The government has also exempted exports linked to the Advance Authorisation Scheme (AAS) and government-to-government food aid agreements. To avoid disruption in maritime trade, vessels already loaded before May 13 or shipments that completed customs formalities will still be allowed to leave Indian ports.

The latest clampdown reflects growing concern within the government over tightening domestic availability after India slipped into a second consecutive sugar deficit season. Erratic monsoon patterns, heat stress and the looming threat of El Niño significantly affected sugarcane yields across Maharashtra, Uttar Pradesh and Karnataka — India’s top sugar-producing states. Several sugar mills in these regions reportedly ended crushing operations earlier than expected due to lower cane availability.

Adding to supply pressure is India’s aggressive ethanol blending programme. Large quantities of sugarcane and sugar syrup have increasingly been diverted towards ethanol production under the Centre’s biofuel policy, reducing the amount available for the food market. Industry estimates suggest domestic sugar stocks have fallen sharply compared to previous seasons, even as annual consumption demand remains high.

Retail sugar prices in several Indian cities reportedly rose between 15 and 20 per cent in recent months, increasing pressure on policymakers ahead of the festive season when consumption surges across households, sweet manufacturers and beverage companies. Officials believe the export ban will help stabilise wholesale sugar prices around ₹40-45 per kilogram and ensure uninterrupted supplies for domestic consumers.

India, the world’s second-largest sugar producer after Brazil, has played a major role in global sugar trade in recent years, accounting for nearly 25-30 per cent of global exports during peak seasons. Earlier this year, New Delhi had allowed mills to export around 1.59 million tonnes of sugar along with an additional quota of nearly 87,000 tonnes after expectations of surplus output. However, revised crop estimates later forced authorities to reconsider the export strategy.

The Indian Sugar & Bio-Energy Manufacturers Association recently projected sugar production for the 2025-26 marketing year at nearly 32 million tonnes, close to India’s annual consumption requirement. Analysts warn that if weather conditions remain unstable during the upcoming kharif season, the pressure on supplies may continue beyond September.

The ban immediately rattled international commodity markets. New York raw sugar futures reportedly climbed around 2.5 per cent to nearly 22.80 cents per pound after the announcement, while London white sugar futures surged more than 3 per cent amid fears of tighter global supplies. Countries heavily dependent on Indian sugar imports including Bangladesh, Indonesia and several African nations are now expected to seek alternative suppliers, primarily Brazil and Thailand.

Global food manufacturers, confectionery companies and beverage producers may also face rising procurement costs if supply tightness continues. Traders are already warning of increased volatility in the international sugar market until clearer projections emerge after the next harvest cycle.

For Indian sugar mills, however, the move presents a mixed picture. While domestic sales may improve local availability, export restrictions could affect revenues and delay cash flow cycles that are crucial for clearing dues owed to sugarcane farmers. Industry bodies are expected to continue lobbying for partial export quotas if production conditions improve later this year.

For now, the government’s message remains clear: domestic food security and inflation control will take precedence over export opportunities. Market participants are now closely tracking monsoon developments, kharif sowing data and El Niño forecasts, which could ultimately decide whether India reopens sugar exports after September.

DGFT | Business Upturn

From inflation fears to weak cane output: The real reasons behind India’s sugar export ban