NEW DELHI: India did not wait for sugar prices to rise before it acted. On May 13, 2026, the Directorate General of Foreign Trade issued a notification moving sugar raw, white and refined from the restricted to the prohibited export category with immediate effect. The stated reason was to enhance domestic availability and prevent price rises. The operative word was prevent not control.
What the Notification Said
The DGFT notification, issued under the Ministry of Commerce and Industry, prohibits fresh sugar export licences until September 30, 2026. Exemptions have been carved out for shipments under the Advance Authorisation Scheme, government-to-government export arrangements, consignments already in the physical export pipeline before May 13 and quota-based exports to the European Union and the United States under existing trade arrangements.
The decision followed a review of production estimates for the 2025-26 sugar season, which had been revised downward through the year as yields in Uttar Pradesh and Maharashtra India’s two largest sugarcane producing states fell short of projections due to weather abnormalities. ISMA the Indian Sugar and Bio-energy Manufacturers Association, put the 2025-26 production figure at 293 lakh metric tonnes after ethanol diversion. That number sits above the 2023-24 figure of approximately 280 lakh metric tonnes and significantly above the 261 lakh metric tonnes recorded in 2024-25, but the closing stock picture told a more concerning story than the production number alone.
The Stock Gap That Drove the Decision
India’s government has historically treated approximately 60 lakh metric tonnes as the minimum comfortable closing stock level for sugar at season end enough to bridge supply between crushing seasons without price volatility. As of May 2026 the projected closing stock stood at approximately 40 lakh metric tonnes. That is 20 lakh metric tonnes below the threshold the government considers safe.
A 33 per cent shortfall against a comfort level is not a minor variance. It is the kind of number that if left unaddressed through continued exports, would translate directly into retail price pressure within months. India’s wholesale inflation had already hit a 42-month high of 8.3 per cent in April 2026. Adding sugar price stress to that environment was a risk the government calculated it could not absorb.
El Nino and the Monsoon Shadow
The immediate production shortfall was one half of the government’s concern. The other was what comes next, The India Meteorological Department forecast below-normal rainfall for the 2026 monsoon, citing the development of El Nino conditions transitioning from a weak La Nina phase. A deficient monsoon in 2026 would affect the sugarcane crop that feeds the 2026-27 crushing season, the season after the current one.
The government was therefore managing two problems simultaneously. A current stock deficit of 20 lakh metric tonnes below comfort levels and a forward production risk from an expected weather pattern that had not yet fully arrived. Prohibiting exports in May 2026 addressed both. It preserved existing stocks for the current gap and created a buffer against the next season’s potential shortfall before that shortfall became a certainty.
The Global Context India Was Reading
The external environment in early 2026 was not benign. The Iran conflict had pushed oil prices higher, raising production costs for fertilisers and sugar milling operations globally. Shipping routes to the Middle East had become longer and more expensive as vessels diverted around the Cape of Good Hope to avoid the Red Sea and Suez Canal, freight and insurance costs had risen sharply on these routes.
The FAO Sugar Price Index averaged 88.5 points in April 2026 down 4.7 per cent from March on expectations of ample Brazilian and Thai supply but still 2 per cent higher than April 2025. Global prices were elevated relative to the previous year even as they softened month-on-month. For India to continue exporting into that environment while its own stocks sat 20 lakh metric tonnes below the safety threshold would have meant selling from a position of domestic vulnerability into a market offering temporarily attractive prices.
The Farmer and Mill Equation
The prohibition is not cost-free for the industry it governs. Approximately 5 crore sugarcane farmer families and 5 lakh sugar mill workers are directly tied to sugar export policy in India. As of April 20, 2026, mills had cleared 88.6 per cent of cane dues owed to farmers for the 2025-26 season Rs 99,961 crore paid out of Rs 1,12,740 crore total. That leaves approximately Rs 12,779 crore in outstanding arrears.
ISMA acknowledged the precautionary logic of the prohibition but noted openly that the export ban limits mills’ flexibility to use global price opportunities to clear those arrears faster. When export revenue is cut off, mill liquidity tightens and the farmer waiting for cane payment feels it first.
The government’s response to this tension was visible in a separate decision announced in the same period. The Fair and Remunerative Price for sugarcane for 2026-27 was raised to Rs 365 per quintal a 2.81 per cent increase over the 2025-26 FRP of Rs 340 per quintal. The price support to farmers was increased even as their mills lost export income. Whether that arithmetic fully compensates for the lost export revenue is a question the arrears figure of Rs 12,779 crore does not yet answer.
What This Signals
India’s use of export controls as a pre-emptive inflation management tool is now an established pattern across multiple commodity categories. Sugar in 2022 and 2026, Wheat in May 2022, Non-basmati rice in 2023 and Broken rice in August 2022. In each case the government moved before domestic retail prices reached crisis levels accepting the trade-off of lost export revenue and global market disruption in exchange for domestic price stability.
The consistency of that choice across commodities and across years reflects a clear policy priority: food price stability for the domestic consumer takes precedence over export earnings, international trade commitments and mill revenue in periods of supply uncertainty.
About the Author
