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Informist, Wednesday, Sept. 9, 2026

 

MUMBAI – India's sugar export availability will remain limited in the near term as declining inventories reduce the market's capacity to absorb production shortfalls, BMI, a Fitch Solutions company, said in a report Wednesday. While the 2026-27 production forecast is projected to be up 12% to 33.6 million tonnes, key risks—such as aggressive government ethanol blending targets and El Nino-related rainfall deficits—could undermine this growth. If these risks materialise, slow inventory rebuilding will continue to limit India's sugar export potential in the coming seasons, the report said.

 

India's sugar self-sufficiency ratio dropped below 100% over the past two years, hitting 97.4% in 2024 and 93.0% in 2025 as consumption outpaced production. This deficit is underscored by a five-year decline in beginning stocks, which shrank by an average of 13.2% annually, according to the report.

 

India is expected to maintain strict sugar export bans as the government continues to prioritise domestic supply security over global trade, the report said. Following a weak 2022–23 harvest and El Nino drought fears, India fell from the world's second-largest to the third-largest sugar exporter. High domestic demand ahead of the festival season caused sugar prices to surge 20.8% year-to-date to INR 55.7 per kg by August 2026, BMI said. In response, the government reintroduced a complete export ban in May 2026, imposed stock holding limits, and temporarily dropped its usual 100% tariff to allow a 1 million tonne duty-free raw sugar import quota. Trade restrictions are expected to remain tightly controlled until local production and stock levels fully recover, the report said.

 

India's ethanol programme is expected to continue to divert significant sugar production despite sugarcane's declining share in the overall biofuel mix. Having met its E20 blending target early, the government remains committed to higher blending rates to cut fuel imports and boost energy security, the report said. Furthermore, ethanol prices have recently outperformed sugar, maintaining strong economic incentives for diversion. While a prolonged war between the US-Iran and high crude oil prices support this trend, the programme is fundamentally driven by structural policy goals rather than short-term oil market volatility.

 

India's sugar export surpluses remain low because mills continue diverting millions of tonnes of sugar to ethanol production. Mills have diverted 3 million tonnes of sugar to ethanol and exported only 800,000 tonnes. The government raised prices for corn and rice ethanol to rely less on sugarcane. However, sugar exports are expected to stay limited because sugar mills still produce about 30% of the country's ethanol, according to the report.

 

"We expect any El Nino-linked production disruptions faced in the 2026/27 season to place greater pressure on exportable surpluses than in previous cycles, with effects likely to extend beyond the immediate harvest season," the report said.

 

Strengthening El Nino conditions and below average monsoon rainfall threaten India's water-intensive sugarcane crop ahead of the 2026-27 season. With beginning sugar stocks forecast at a historically low 5.1 million tonnes, any resulting production deficit will likely force India to severely restrict or completely halt exports to protect domestic supply, the report said.  End

 

Reported by Ritwika Dutta

Edited by Deepshikha Bhardwaj

 

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