India’s push to raise ethanol blending beyond the current 20% (E20) level could force stricter curbs on sugar exports, according to a report by BMI (Fitch Solutions), as policymakers balance fuel goals with domestic sugar availability.
The report noted that while India has the capacity to expand ethanol production further, diverting more sugarcane toward ethanol would tighten sugar supplies. This, in turn, may require export restrictions—potentially helping the government stabilise domestic prices even as global sugar rates are expected to rise through 2026.
India has already taken a cautious approach to exports in recent years. After restricting shipments in the 2022–23 season due to lower output, the government allowed limited exports in 2024–25 (around 9 lakh tonnes out of 10 lakh tonnes permitted). In the ongoing 2025–26 season, about 3.6 lakh tonnes have been exported so far out of 15.9 lakh tonnes allowed.
Meanwhile, industry concerns persist over mounting sugarcane dues to farmers, which stood at ₹16,918 crore by the end of March. Although mills have cleared about 84% of total dues, the remaining arrears remain significant. Industry stakeholders argue that increasing ethanol production could improve mill liquidity and help address these payments.
However, ethanol supply remains below capacity. Oil marketing companies have ordered only 288.51 crore litres from sugar-based producers—far short of their nearly 1,000 crore litre annual capacity—with less than half supplied so far. Grain-based distilleries have also delivered just 31% of their allocated volumes.
On the global front, BMI projects sugar prices to rise gradually from an average of 14.6 US cents per pound in Q1 2026 to 17.2 cents by Q4, with a full-year average of 16.2 cents. The agency also flagged weather risks, particularly a potential El Niño, which has historically reduced sugar output in key producers like India and Thailand, pushing global prices higher.
India’s sugar production has already shown volatility, dropping to 261 lakh tonnes in 2024–25 from 320 lakh tonnes in the previous season, partly due to weaker monsoon conditions.
Overall, the report suggests that India’s ethanol ambitions, export policies, and weather uncertainties will play a critical role in shaping both domestic sugar availability and global market dynamics in the coming years.
