India's sugar stocks are dwindling, prompting the government to consider halting exports and ethanol diversion early in the 2026-27 season. According to a BusinessLine report, the Food Ministry has allotted a 22.5 lakh tonnes (lt) quota for August 2026, unchanged from a year ago, as a measure to check price rises. However, with depleting stocks and limited options to augment supply, the festival demand during October-November will largely depend on fresh production.
Sugar Quotas Tighten as Stocks Deplete
The total sugar allocation during October 2025 to August 2026 has reached 245.5 lt, which is 2.6% lower than the 252 lt allocated in the same period a year ago, the report stated. Industry sources indicated that some mills have been selling more sugar than their allotted quotas, prompting the government to cut their entitlements. As against 201 lt allocated by the government during October 2025-June 2026, as much as 214 lt was sold, industry sources said.
Government Steps Up Oversight Amid Panic
Sensing lower sugar availability with mills, the government on July 24 announced it would conduct physical verification of stock in every mill during the first fortnight of August. Additionally, stock limits have been imposed. An industry veteran commented, “All these steps show panic reaction after allowing sugar for export and ethanol without ensuring adequate reserve for the domestic market. This lesson may discourage the government to allow any sugar (sucrose) for ethanol next year as it will be at the cost of domestic stock.”
Ethanol Diversion May Be Curbed
With Diwali falling on November 8, the government may curb diversion of sugarcane juice for ethanol for at least the first three months of the 2026-27 season to ensure the domestic market gets adequate sugar, according to sources. If sugarcane juice is restricted, only B- and C-heavy molasses remain as ethanol feedstocks. Allowing B-heavy molasses reduces sugar production, while C-heavy molasses can yield about 300 crore litres of ethanol, the industry veteran said, noting competing demand from liquor, pharmaceutical, chemical, and other industrial sectors.
Sugarcane Area and Crop Conditions
Government data show India’s sugarcane sowing area for 2026 is 57.58 lakh hectares (lh), down from 58.84 lh in 2025. The top three states — accounting for 85% of India’s sugar production — have reported the following areas:
| State | 2026 Area (lh) | 2025 Area (lh) |
|---|---|---|
| Uttar Pradesh | 28.97 | 28.02 |
| Maharashtra | 11.82 | 13.72 |
| Karnataka | 6.61 | 6.51 |
Param Jeet Singh Hudda, a sugarcane farmer in Shamli district of western Uttar Pradesh, said, “The crop is in very good conditions and if all go well in next two-three months, the yield may be higher this year as there was a drop in 2025.” He noted that pest appeared in many areas around mid-August last year, reducing yields.
Outlook for 2026-27 Season
G K Sood, a former India head of a global trading firm, provided a scenario analysis: even if 35 lt opening stock as of October 1, 2026, is assumed, with October production historically not exceeding 5 lt, total availability would be at most 40 lt. If the government maintains a domestic sales quota of 24 lt for October 2026 (same as a year ago), a surplus of 16 lt would carry into November. Sood projected that at current crop conditions and acreage, India’s sugar production in 2026-27 may at best match this season’s level. However, with exports and ethanol diversion unlikely next year, the government could raise the closing stock on September 2027 to about 50 lt. He cautioned that the fate of sugar depends on rainfall and temperature over the next two months.
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