India plans 1.5 million ton sugar export quota on higher domestic surplus

India was the world's second-largest sugar exporter in the five years to 2022/23, with shipments averaging 6.8 million tons annually.

India plans to allow sugar exports of 1.5 million metric tons in the new season, as a decline in the diversion of sugar for ethanol production is expected to leave a larger domestic surplus, government and trade sources told Reuters on Monday.

Higher exports from the world's second-largest sugar producer could pressure benchmark New York and London futures,, which are hovering near five-year lows.

Exports will help reduce sugar stocks in the country and support local prices, benefiting producers such as Balrampur Chini Mills, EID Parry, Dalmia Bharat, and Shree Renuka Sugars, whose shares rose up to 5% in early trade on Monday.

"We have agreed to allow sugar exports this year, keeping in mind surplus stocks and farmers' interests," said a government source who did not wish to be quoted ahead of the final order.

The government is likely to allow sugar exports of 1.5 million tons in the 2025/26 season, which began on October 1, with a final order expected soon, said another government official, who did not wish to be named as he was not authorised to speak to the media.

The Ministry of Consumer Affairs, Food and Public Distribution did not immediately respond to a Reuters’ request for comment.

India was the world's second-largest sugar exporter in the five years to 2022/23, with shipments averaging 6.8 million tons annually. But a drought led the government to ban sugar exports in 2023/24, and it allowed only 1 million tons to be shipped overseas last year.

India's net sugar output for the 2025/26 season is estimated at 30.95 million tons after diverting about 3.4 million tons for ethanol production, up 18.5% from last year, according to the Indian Sugar & Bio-Energy Manufacturers Association (ISMA).

ISMA last week demanded New Delhi allow exports of 2 million tons of sugar in the new season.

The industry body had earlier expected a diversion of 4.5 million to 5  million tons of sugar for ethanol this year, but only 28% of the total allocation for the biofuel went to sugar-based ethanol, with the remainder allocated to feed-based ethanol plants.

Exporting 1.5 million tons could prove difficult for Indian industry, given that local prices are trading at a premium to global levels, said a Mumbai-based dealer with a global trade house.

"A few mills in Maharashtra may begin producing raw sugar for sale to refineries in Asia and Dubai," he said.

India is also planning to remove its 50% duty on the export of molasses, the government official said.