Will India Stop Exporting Sugar Because of the Ethanol Demand?

Key Takeaways

• India, once the second-largest sugar exporter, but India stop export atleast 3 more seasons due to ethanol demand.
   
• India imposed a ban on sugar exports till Sep 30 2026, previously, after this year the world’s top sugar producer only shipped 800,000 tons of the sweetener to international markets, lower than its average 6.8 million metric tons a year exports during the past five seasons to 2022-23. 

Why Will India Stop Exporting Sugar for the Next 3 Years?

India will have little sugar surplus for export for at least 3 more seasons, according to Reuters, as El Nino threatens cane output and ethanol demand and supply. Interviews with over a dozen trade executives, government sources, and farmers confirm that lower cane availability and rising ethanol demand will leave little room for exports. 

Rahil Shaikh, Managing Director of MEIR Commodities India, said, “Supplies are already tight in India, and now El Nino is emerging as a major risk.” He added that disappointing rains could keep India out of sugar exports “for at least three years.”

India produced an average of 6.8 million metric tons for export annually over the 5 seasons through 2022-23, about 10% of global shipments. This year, after exporting around 800,000 tons, India banned sugar export till September 30, 2026. Production is seen as around 27.9 million tonnes this season versus the previous forecast of 30.95 million tonnes and below domestic annual consumption of 28.5 million tonnes. Mill stocks at the beginning of the new season are estimated to be 3.5 million tonnes only. 

How Will Tighter Sugar Supply Affect Indian Households and Global Buyers?

Sugar is a sensitive point in India, because many lower middle class family depend on sugar as an affordable calorie source. India has stopped exporting sugar, removing a key balance for importers across the world such as Asia, Africa, and the Middle East, tightening global supply and supporting prices in London and New York. El Nino is predicted to weaken India's monsoon to its lowest level in 11 years, with June rainfall already running more than 40% below average, prompting many farmers to delay cane planting.

There is a silver lining for India's domestic market though. By prioritising sugar for local consumption over exports, the government aims to keep prices more stable for Indian households compared to the volatile international market. LoansJagat’s GST guide shows that after recent rate cuts, an everyday household consumer paid only ₹250 in tax on common food items.Similar tight monitoring of food costs is expected as sugar supply gets managed carefully through 2027-28.

Mill Inventory (Oct 1 start)

3.5 million tons

Lowest in 3+ decades

What Do Industry Experts Say About India's Sugar and Ethanol Trade-Off?

Samir Somaiya, Chairman and Managing Director of Godavari Biorefineries, said, “The trajectory for ethanol demand is incredibly strong. The next phase of demand evolution will be driven by the commercial rollout of flex-fuel vehicles.” Ethanol demand could more than double to 30 billion litres by 2039-40, up from the current 12 to 13 billion litres, as ethanol blending and flex-fuel vehicle adoption gather pace. Maruti Suzuki launched India’s flex-fuel passenger vehicle this month, while Hero MotoCorp launched a flex-fuel motorcycle.

B.B. Thombare, Managing Director of Natural Sugar in Maharashtra, said future government policy will likely favour ethanol production over sugar exports. 

Mohan Narang, Director of K.S. Commodities, warned, “Because of a severe El Nino and rising demand for ethanol, not only would exports from India be wiped out, but imports into India in the coming years could also become necessary.” India last imported sugar in 2016-17 and 2017-18, after an earlier El Nino drought. The likely solution being studied is promoting alternative crops like soybeans and pulses to free up irrigation water for essential food crops.