The Indian Sugar and Bio-energy Manufacturers Association (ISMA) on Thursday stated that while it was anticipating a calibrated review of the export situation, the immediate nature of the current restrictions may pose practical challenges in honoring certain export commitments already contracted with overseas buyers.

“We believe that permitting the execution of already concluded contracts may help facilitate orderly trade settlement and support the credibility of Indian suppliers in the global market,” said Deepak Ballani, Director General of ISMA. Further implications arising from the order are being examined in consultation with member mills, he added.

Exports were permitted by the Centre in November 2025 based on the then-prevailing production estimates and an encouraging outlook for the sugar season, ISMA said in a statement. However, as the season progressed, sugar production in certain key States, particularly Maharashtra and Uttar Pradesh, was impacted by lower-than-anticipated yields coupled with weather-related abnormalities, resulting in a moderation of overall actual production, it said.

Precautionary move

Nevertheless, the current sugar season (October-September) remains broadly balanced, and the country is expected to maintain adequate closing stocks at the end of the season, it said.

According to informal reports, about 6.5 lakh tonnes of sugar exports have already been physically shipped, while an estimated 40,000–60,000 tonnes are understood to be in the pipeline as permitted by the government, ISMA said.

The industry body also viewed the move as a precautionary step aimed at ensuring adequate domestic availability of sugar, given the evolving domestic supply scenario and climatic uncertainties for the upcoming 2026-27 season, including concerns relating to monsoon rainfall distribution.

Prices up 4%

According to Pushan Sharma, Director at CRISIL Intelligence, domestic sugar prices have risen approximately 4 per cent year-on-year between October 2025 and April 2026 and are expected to be roughly 5 per cent higher overall for the entire 2025-26 season. Production is now estimated at 28 million tonnes (mt), 8 per cent lower than the 30.5 mt expected earlier, as unseasonal showers in October 2025 triggered the flowering of sugarcane and lowered recovery rates in Maharashtra and Karnataka.

“With closing stocks projected at just 3.8 mt, which is equivalent to 1.5 months of consumption, the government’s priority is clearly to preserve domestic availability and contain prices,” Sharma said, adding that the five-year average for stocks was equivalent to 2.5 months of demand.

Limited impact on mills

The impact on millers, however, is limited, as exports have accounted for less than 5 per cent of sales over the past two years, Sharma said. Despite firmer prices, the margins of mills are expected to decline by approximately 100 basis points in the current season due to an 8 per cent increase in sugarcane costs and higher variable expenses. Additionally, stagnant distillery volumes, slow offtake of ethanol by oil marketing companies, and the absence of clear blending targets will weigh on profitability, he added.

Industry sources said that the government is not prepared to increase the sugar minimum sale price (MSP), nor does it want sugar prices to rise in the open market, whereas the sugarcane Fair and Remunerative Price (FRP) is rising every year, along with other costs such as labour, harvesting, transport, interest on credit, and operational expenses. Ethanol prices are also not increasing proportionately.

“Now sugar exports are also banned. In such a situation, how will sugar mills survive financially?” an industry executive wondered. “If the industry is expected to support farmers, ethanol blending, green energy, and the rural economy, then a sustainable revenue model for sugar mills is equally important. Otherwise, the financial stress on the sugar sector will become very serious in the coming years,” he said.

Export unlikely next season

Other sugar sector experts pointed out that mill-gate sugar prices in Uttar Pradesh are quoted near ₹42,000/tonne, which is nearly 10 per cent higher than last year’s average. This price strength is expected to persist through the remainder of the season and into the next, driven by several structural factors, said another sugar industry source.

He listed factors such as an estimated closing stock of 3.2–3.5 mt (as of September 30, 2026), a sharp decline from 4.7 mt a year ago. This year’s closing stock will also be significantly lower than the government’s historical comfort threshold of 5–6 mt, he said. Kanani said the current policy environment suggests that export allocations for the coming year are highly unlikely.

Rahil Shaikh, MD of agro-commodity trading firm MEIR, said that while the reason for the ban is best known to the government, “It is ruthless on the trade to bring in a ban with immediate effect; some transition is always good.”

Published on May 14, 2026