Can India afford to stop exporting sugar?

In today’s episode on 20th May 2026, we tell you why the Indian government has paused sugar exports until the end of September and what it could mean for the economy. Book a FREE call with Ditto https://ditto.sh/vx51ji

• 0:00Speaker 00

  Hello folks, you're tuned into Finshots Daily. In today's episode, we tell you why the Indian government has paused sugar exports until the end of September and what it could mean for the economy.

• 0:14Speaker 00

  Before we begin, here's a quick word from Team Ditto. Life has a way of surprising us and not always in a good way. Sometimes it's a sudden illness or an unexpected hospital visit that can shake up everything. In India, families still pay about 39% of medical expenses directly from their own pockets and just one hospital's take can wipe out years of savings. The easiest way to protect yourself is by getting a good health insurance plan. It's way cheaper than footing one huge bill. And if you're unaware where to start, book a free call with Ditto. No spam, just honest, jargon-free guidance. Trusted by over 8 lakh people for their health and term insurance needs. The link is in the description. Now, back to the story.

• 0:56Speaker 00

  India is the world's second-largest sugar producer and exporter after Brazil. So when a country like India suddenly says, "We're not exporting sugar for now", it raises eyebrows. And that's exactly what happened a few days ago. The government has paused exports of raw, white and refined sugar until the end of September, which means that traders can't send sugar abroad for now. There are a few exceptions though. Sugar exports promised earlier to the US and the EU can continue. Shipments already being loaded or cleared before the announcement can still go ahead and exports requested by foreign governments for food security reasons are also allowed. Now, if you're wondering why, just understand that India doesn't feel as comfortable about its sugar stockpile right now.

• 1:39Speaker 00

  For context, India's sugar production for the 2025-26 sugar season, which typically runs from October to September, is expected to touch 283 lakh tonnes. That's actually 11% higher than last season's 254 lakh tonnes. But the problem is that it's still 4% lower than what the government had expected earlier. You could blame the unseasonal showers in October 2025 that triggered flowering in sugarcane crops in Maharashtra and Karnataka. This essentially lowers sugar recovery rates, meaning you get less sugar from the same crop. Add to that disruptions in fertilizer supplies caused by the West Asia crisis and suddenly production estimates began looking weaker than expected.

• 2:25Speaker 00

  That also affects the closing stock of sugar we have left until the next sugarcane crushing season begins, which is expected to be around four million tonnes. Now that's roughly equal to 1.5 months of consumption. And while that may not sound alarming, it's still the lowest closing stock in nine years. Besides, India's five-year average buffer stock has typically been enough to cover around 2.5 months of demand. So from the government's perspective, this level may simply feel too close for comfort. And when governments feel supply could tighten, they usually prefer caution. Instead of letting sugar flow overseas, they'd rather preserve a buffer for domestic consumption. The other thing is that sugarcane is also used to make ethanol, which India blends into fuel.

• 3:09Speaker 00

  Now, we know that some people, especially those with older vehicles, have experienced reduced fuel economy or compatibility issues because of ethanol blended fuel. By the way, the government says there's no evidence to back this up, and we are going to make a video on this. It's releasing this Saturday. So stay tuned and subscribe to Funchots TV on YouTube to watch that video. But for the government, ethanol is an easy way to rely less on imported oil. And with oil prices climbing due to the West Asia crisis, that has become even more important. Because if India exports too much sugar and later finds itself short on ethanol feedstock, it may have to buy more fuel from abroad, adding pressure to costs.

• 3:50Speaker 00

  So in many ways, this temporary export ban looks like the government trying to avoid multiple fresh parts of inflation at a time when fuel, fertilizer and food prices already feel uncertain. And that logic makes sense for two big reasons. First, for industries that use sugar as raw materials like FMCG companies, beverage makers, confectionery brands and even pharmaceutical firms, this move could help prevent a sharp rise in costs, especially with the festival season a few months away when sugar demand typically shoots up. But there's another reason too. India's sugar exports were already becoming a bad deal. Yes, you read that right. You see, Indian sugar mills sell sugar domestically at prices shaped partly by government policy and partly by market conditions.

• 4:32Speaker 00

  So for exports to make sense, they need to earn enough overseas to at least match what they would make selling sugar at home. By some estimates, they needed to earn seventeen cents per pound on raw sugar exports just to break even. But global markets had other plans. Brazil had already flooded the market with supply enough to keep prices low. So on average, Indian mills were effectively losing around three cents per pound or nearly sixty-six dollars per ton globally on raw sugar. Even if you look at refined or white sugar, where India has traditionally done better, especially in nearby countries like Sri Lanka, Somalia, Zipputi, and Afghanistan that depend on imported finished sugar, export margins had become quite thin.

• 5:17Speaker 00

  So you could say that the government was effectively just hitting pause on something that wasn't really working out anyway. The proof is in the pudding. By the time the ban was announced, many mills had already stopped chasing fresh export contracts because the economics no longer added up. If exports were profitable, India would probably have shipped close to the twenty lakh tonnes the government had permitted for the twenty twenty-five, twenty-six season. Instead, actual exports stood at only around seven point five to eight lakh tonnes, much of which had already been shipped or was already in the pipeline. So, yes, from the government's perspective, this looked like hitting two birds with one stone. But there's a catch. Hitting pause on sugar exports can create a fresh problem for sugar industry itself because here's the thing.

• 6:00Speaker 00

  When exports stop, more sugar stays within India than expected and basic economics tells us that when supply rises, prices tend to fall. Now imagine a sugar mill that was hoping export prices would improve or was counting on export orders to support revenues. Suddenly, that option disappears and when revenues got squeezed, mills can run into cash flow problems and when that happens, one of the first things to suffer is payments to sugarcane farmers. Delays become more common. Now, this isn't exactly A new problem. Sugar mills in India have a long history of delaying payments to farmers, creating what are called cane arrears or unpaid dues that sometimes pile up for months.

• 6:40Speaker 00

  In fact, these arrears have touched a whopping sixteen thousand eighty-seven crore rupees as of Feb 2026. That's nearly thirty-two times higher than in 2024, 25. So if export restrictions squeeze mill revenues again, the fear of more and bigger delays becomes very real for farmers. Take Maharashtra, for instance. Mills there still reportedly had thirty to forty percent of their export quotas left unused when the ban kicked in. So those exports are now effectively frozen, creating a cash flow problem at a particularly bad time. And when farmers worry about delayed payments, they often start looking for alternatives, right? One such alternative is jagri. Instead of sending sugar cane to mills, farmers may divert it to make jagri either themselves or through nearby local processors

• 7:23Speaker 00

  because it often fetches quicker payments and sometimes even better returns. That's because jagri is much simpler to make than refined sugar. You crush sugar cane, boil the juice and let it solidify into blocks or powder. You don't need a large industrial refining process or chemicals. Just basic equipment like a crusher and a large iron pan over fire. More importantly, jagri traders often pay farmers immediately or within days. Sugar mills, on the other hand, are legally supposed to pay farmers within fourteen days of receiving cane. But when mills face cash problems, that timeline can stretch. In some cases, jagri can also be more profitable. For instance, estimates from Karnataka suggest farmers could earn about three thousand four fifty rupees per tonne after expenses

• 8:06Speaker 00

  compared to roughly two thousand eight fifty rupees per tonne from sugar mills. So if more farmers begin diverting cane towards jagri production, sugar mills get less cane to crush into sugar and ethanol. That means lower sugar output and weaker ethanol production in the next season. And suddenly, we're back to square one. The government may once again face the same dilemma of whether it should make do with thinner sugar buffers or hit pause on exports all over again. Now that kind of, now that kind of becomes a vicious cycle. One India has seen before with repeated export restrictions whenever output weakens or supply concerns rise. The real saver, the real savior could simply be a timely and favorable monsoon next season.

• 8:49Speaker 00

  Because without that, someone always ends up paying the price, whether it's sugar mills, farmers or consumers dealing with inflation. All right, folks, I will see you in the next one. Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected]. Until next time.