Sugar Stocks Sink Up To 6% After Govt Halts Exports Till September

Shares of sugar companies came under selling pressure on Thursday after the government prohibited sugar exports with immediate effect till September 30, 2026, in a move aimed at controlling domestic prices, ensuring local availability and containing inflationary pressures.

The sharp reaction reflected investor concerns that export restrictions could hurt revenue prospects for sugar mills, especially at a time when companies were expecting improved export opportunities in the current season.

Among the biggest losers, Dhampur Sugar Mills dropped 6.12% to ₹144.19, while Dwarikesh Sugar Industries fell 6.02% to ₹43.81.

Balrampur Chini Mills slipped 2.40% to ₹535.70, while Triveni Engineering & Industries declined 1.37% to ₹382.90. Shares of Shree Renuka Sugars, Dalmia Bharat Sugar and Industries and EID Parry also traded lower.

Govt Tightens Sugar Export Policy

In a notification issued on May 13, the Directorate General of Foreign Trade (DGFT) said the export status of raw, white and refined sugar had been changed from "Restricted" to "Prohibited" with immediate effect until September 30, 2026, or until further orders.

The government, however, clarified that the restriction would not apply to exports to the European Union and the United States under tariff rate quota arrangements.

The notification also provided transitional relief for consignments already in the export pipeline. These include cargo where loading had already commenced, shipments with completed shipping documentation and vessels that had already berthed or anchored at Indian ports before issuance of the order.

The government also retained flexibility to permit exports to certain countries on food security grounds if formal requests are received. Unless extended further, the policy will automatically revert to "Restricted" after September 2026.

Supply Concerns Behind Decision

The move is widely seen as an attempt to preserve domestic inventories amid concerns over lower sugar production and uncertain weather conditions.

India had earlier permitted exports of up to 2 million metric tonnes for Sugar Year (SY) 2026, compared with 1 million metric tonnes in the previous season, expecting stronger production recovery. However, output estimates have since weakened.

Rachit Mehta, Vice President and Sector Head at ICRA, said the export ban should help contain any significant rise in domestic prices while ensuring adequate availability.

"In ICRA's opinion, the move will curb major increases in domestic prices and ensure domestic availability amid expectations of lower sugar closing inventory and next year's production," Mehta said.

According to ICRA estimates, net sugar production after ethanol diversion may remain around 28 million metric tonnes, lower than earlier expectations. Against domestic consumption of 28.3 million metric tonnes and exports already completed, closing inventories could decline to around 4.3 million metric tonnes by September 2026.

That level would represent nearly two months of consumption and remains lower than inventory levels seen in previous years.

Ethanol Shift, El Nino In Focus

Industry experts also pointed to increasing diversion of sugarcane towards ethanol production as another factor tightening sugar availability.

Concerns have also emerged around the next sugar season, with forecasts suggesting potential risks from El Niño conditions that could affect rainfall patterns and crop output.

India exported sugar worth nearly $1.9 billion in FY25, with major markets including Sri Lanka, Bangladesh, Libya and Sudan. As the world's second-largest sugar producer and exporter, India maintains tight government oversight of exports through quota allocations.

Analysts said while the export ban may pressure sugar stocks in the near term, sectors such as FMCG, beverages and confectionery could benefit from stable domestic sugar prices and reduced input cost volatility.