Recent policy decisions relating to sugar exports, sugarcane pricing and ethanol blending indicate that the sector is being viewed not merely as a sweetener industry but also as a critical component of India’s energy security and biofuel strategy, writes Prakash Naiknavare
l Why India paused sugar exports
INDIA’S SUGAR SECTOR is witnessing a phase of careful policy balancing, where the government is attempting to simultaneously safeguard the interests of farmers, consumers, ethanol blending targets and overall inflation management. On the temporary restriction on sugar exports, the government appears to have adopted a cautious approach to ensure sufficient domestic sugar availability and maintain price stability.
Concerns regarding lower-than-anticipated sugar production in major producing states, weather-related impacts on sugarcane yield and flowering issues have contributed to this policy stance. The Centre’s primary objective has been to maintain comfortable closing stock levels and prevent any sharp rise in domestic sugar prices in the prevailing inflationary environment.
The sugar season 2025-26 had an opening stock of around 50 lakh metric tonne (LMT). With estimated sugar production of around 279 LMT and exports of nearly 8 LMT, the total sugar availability is lower compared to the previous season. This relatively tighter supply situation appears to have prompted a cautious approach towards sugar exports in order to maintain comfortable closing stocks and ensure domestic price stability. At the same time, relatively subdued domestic demand suggests that India continues to maintain adequate availability.
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Export proceeds improve the liquidity position of sugar mills and support timely payment of cane dues to farmers. Predictable export policies are important for long-term sectoral stability and for maintaining credibility in international sugar trade.
l How placing exports in ‘Prohibited’ category may impact the sector
THERE IS MUCH concern regarding the decision to shift sugar exports from the ‘Restricted’ category to the ‘Prohibited’ category till September 30, 2026. The ‘Restricted’ framework already provided adequate flexibility to the government to regulate exports based on domestic sugar availability. Thus, the decision to move towards a ‘Prohibited’ category may create uncertainty within the sugar sector and affect confidence in India’s global sugar trade policy.
l How cane prices are administered
A MAJOR STRUCTURAL issue is the administered pricing mechanism for sugarcane. The Fair and Remunerative Price (FRP) is fixed by the central government under the Sugarcane (Control) Order after considering recommendations of the Commission for Agricultural Costs and Prices (CACP). The CACP consults all stakeholders, including farmers, sugar mills, state governments and industry representatives, before finalising its recommendations.
The FRP takes into account factors such as cost of cultivation, sugar recovery, sugar prices, by-product value and reasonable returns to farmers. The rationale for maintaining an administered cane pricing system is largely social and political. More than 50 million farmers depend on the sugar sector for their livelihood. Therefore, governments prefer to provide assured price protection to farmers rather than exposing them to volatile market conditions.
l Demand for revision in MSP
IN ADDITION TO FRP, some states announce State Advised Prices (SAP), which are generally higher than the FRP. Uttar Pradesh remains the largest SAP state, while Punjab, Haryana and Uttarakhand have also followed similar practices. However, high cane prices become difficult to sustain during periods of lower sugar realisation, affecting the financial viability of mills and delaying payments to farmers.
This is also the primary reason behind the long-standing demand for revision of the Minimum Selling Price (MSP) of sugar. While sugarcane prices continue to rise through FRP and SAP mechanisms, sugar selling prices do not increase proportionately. There is often a mismatch between cane prices and sugar sale realisations. A realistic MSP is therefore considered essential to ensure sustainable mill operations, maintain timely cane payments and avoid distress sale of sugar in the domestic market.
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l Emphasis on ethanol production
THE ETHANOL BLENDING programme is a crucial support mechanism for the sugar sector, especially during years of surplus production. India now has installed ethanol production capacity of more than 2,000 crore litres annually. However, concerns regarding under-utilisation of installed ethanol capacity are also emerging. Regional imbalances in feedstock availability and fluctuations in sugarcane production have impacted capacity utilisation in distilleries.
Despite these challenges, the long-term outlook for ethanol remains positive due to rising blending targets and growing fuel demand. A significant recent development is the notification of BIS standards for higher ethanol blended fuels. The standards formally define E22, E25, E27 and E30 fuels as petrol blended with 22%, 25%, 27% and 30% ethanol respectively. This indicates that India’s sugar economy is gradually transitioning into a broader bio-energy ecosystem where sugar, ethanol, clean fuel and energy security policies are becoming increasingly interconnected.
The writer is MD, National Sugar Federation
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.
TOPICSSugar priceThis article was first uploaded on May twenty-one, twenty twenty-six, at fifty minutes past ten in the night.