India’s sugar industry is urging the government to double the sugar export allocation to 2 million metric tons for the new season, citing lower-than-anticipated diversion of sugar for ethanol production that is expected to swell domestic surpluses, industry officials announced on Thursday.
The prospect of significantly higher sugar exports from the world’s second-largest sugar producer is poised to exert considerable downward pressure on global commodity markets.
Specifically, benchmark sugar futures traded in New York and London, which are currently languishing near five-year lows, could see further declines as a result of the increased supply entering the market.
The heightened export activity introduces a significant variable to the global sugar supply-and-demand equation, increasing the total available stock and making it more challenging for prices to recover.
This situation creates an environment where international buyers may gain leverage, anticipating or reacting to the influx of cheaper supply, thereby cementing the prevailing bearish sentiment in the futures markets.
India sugar market
India had established itself as a major global player in the sugar market, ranking as the world’s second-largest sugar exporter in the five years leading up to the 2022-23 marketing year.
During this time, the country’s sugar shipments were substantial, averaging an impressive 6.8 million tons per year.
This sustained export performance underscored India’s significant role in ensuring global sugar supply.
However, this trend of robust exports was dramatically interrupted by severe weather conditions.
A significant drought hit the country, leading to a projected decline in sugarcane output and a consequent tightening of domestic sugar availability.
In response to this looming supply constraint and the need to stabilise local prices, the Indian government took the drastic step of imposing a comprehensive ban on sugar exports for the 2023-24 season.
This policy intervention was a major shift, effectively halting the flow of Indian sugar to international markets.
Despite the general ban, the government permitted a minimal allowance for exports, restricting the total outward shipments to just 1 million tons for the entire year.
Estimates for 2025-26
This severe restriction marked a sharp departure from the previous average of 6.8 million tons, highlighting the government’s priority of securing domestic requirements over maintaining export market share in the face of a challenging agricultural year.
“If you are talking about likely export volumes for this season, we’re looking at up to 2 million tons of sugar going out of the country,” Deepak Ballani, director general of the Indian Sugar & Bio-Energy Manufacturers Association (ISMA), was quoted by Reuters in a report.
ISMA estimates that India’s net sugar production for the 2025-26 season, which commenced on October 1, will be approximately 30.95 million tons.
This figure, which is an 18.5% increase from the previous year, is calculated after diverting around 3.4 million tons of sugar for ethanol production.
Although the industry body initially projected 4.5–5 million tons of sugar would be diverted for ethanol production this year, sugar-based ethanol accounted for only 28% of the total ethanol allocation.
The majority of the allocation was instead directed to feed-based ethanol plants.
Industry aims to begin exports ahead of Brazil’s new season
Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories (NFCSF), stated that the sugar industry has petitioned the government to permit mills to commence sugar exports early.
This would enable them to produce raw sugar for overseas shipments at the beginning of the season.
India faces a limited, approximately three-month period for exports. This window exists before the new Brazilian supply season commences, which is expected to depress global prices.
Indian sugar mills anticipate reaching export parity by early December, despite current domestic prices exceeding global rates.
This shift is expected as new-season supplies start to exert downward pressure on the local market, according to Ballani.
Ballani was quoted in the report:
Sugar mills will incur losses due to large unutilised capacity for ethanol as many mills expanded capacity following the government’s push for 20% ethanol blending in petrol, and they will have to produce more sugar.
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