There are two words that have spooked Indian policymakers of late with regard to agriculture: Iran and El Niño. These also explain the thinking behind the government’s decision to ban exports of sugar, notwithstanding the reasonably comfortable domestic availability of the sweetener for now.The Directorate General of Foreign Trade (DGFT), on May 13, issued a notification placing exports of all raw, white and refined sugar in the “prohibited” category “with immediate effect till September 30, 2026”.In other words, no sugar – barring the 14,500-odd tonnes under preferential quotas at concessional duties to the European Union and United States – can go out of the country in the remaining part of the 2025-26 crushing year (October-September).Supply situationIndian mills are expected to produce 279 lakh tonnes (lt) of sugar in 2025-26. With opening stocks on October 1, 2025, at over 50 lt, the total supply of 329 lt would exceed the projected domestic consumption of 280 lt. As far as exports go, the government initially, on November 14, had allowed 15 lt of shipments for the current sugar year. On February 13, it permitted an additional 5 lt of exports, taking the overall allocation for 2025-26 to 20 lt.Out of the 20 lt, around 6 lt have already been shipped out of the country. Adding another 0.5 lt now in ports, and the loading of which on vessels had commenced before the DGFT notification’s publication, would take the exports for the whole of 2025-26 to 6.5 lt. Deducting this, along with the 280-lt domestic consumption, from the total availability of 329 lt will take the closing stocks as on September 30 to 42.5 lt.The above stocks would be the lowest since the 39.4 lt of the 2016-17 sugar year (see table). That, by itself, shouldn’t be cause for concern, as it is equivalent to about 1.8 months of domestic consumption, which can comfortably cover the country’s requirement through Diwali in early November. Mills would, moreover, start crushing for the next sugar year from November.Taking no chancesStory continues below this adIt raises the question: Why has the Narendra Modi government banned sugar exports, moving it from the “restricted” (i.e. subject to quantitative caps) to the outright “prohibited” category?There are three reasons.The first has to do with El Niño – an abnormal warming of the waters of the central and eastern equatorial Pacific Ocean that leads to increased evaporation and cloud-formation activity around South America, while depriving India, Southeast Asia and Australia of convective currents. El Niño is generally associated with subnormal monsoon rainfall and higher-than-average temperatures in India.Also Read | PM appeal, import duty hike: Could Sovereign Gold Bonds have eased strain on forex reserves?Most global climate models are forecasting a “weak-to-moderate” El Niño to emerge towards July, which can affect rains in the second half of the four-month southwest monsoon season (June-September). The models also point to it persisting till at least the end of 2026, with significant probabilities of turning into a “strong-to-very strong” event.“The impact of a poor monsoon won’t be felt much in the coming sugar year. There’s no dearth of water for the cane that is standing in the fields now and would be crushed in 2026-27. The problem will be for the crop that is planted for the 2027-28 sugar year,” said a Maharashtra-based miller.Story continues below this adFarmers in Uttar Pradesh plant sugarcane during February-April, which is ready for crushing in 11-12 months. In Maharashtra, roughly 75% of the cane is accounted for by a 15-month “pre-seasonal” crop planted during July-December. The balance 10% and 15% comprises an 18-month “adsali” (April-June planting) and a 12-month “suru” (January-February) cane, respectively.It is the new cane that farmers have planted or will do so from July, for crushing only next year, which would bear the brunt of El Niño. This crop can also suffer from a shortage of fertilisers due to the ongoing West Asia supply crisis. And that links up with the second reason for the decision to ban exports; sugarcane requires high doses of fertilisers, in addition to water, for optimal growth and yields.The third reason is stocks. Sugar mills are supposed to file ‘P-II’ forms before the 10th of every month, furnishing data on the stocks held by them at the start of the month. Based on this data filed online, the department of food and distribution then allots (“releases”) the quota of sugar for each mill to sell in the whole of that month.NewsletterFollow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions.Subscribe“The government is not sure if all mills are actually holding the quantity of stocks declared in their monthly P-II returns. Such mills may have monthly release quota, but not the corresponding physical sugar to sell,” the earlier-quoted miller noted.Story continues below this adEither way, the government does not want to risk any prospective shortfall in sugar, adding to its worries over fuel, fertiliser and food inflation.The export ban per se may not help, given that ex-factory prices of sugar are ruling at Rs 38-38.5 per kg in Maharashtra and Rs 40-40.5 in Uttar Pradesh. As against this, export prices of Indian white sugar loaded onto ships are about Rs 41/kg, while Rs 34 for raw sugar. With bagging, transportation and port handling charges at Rs 2.5/kg, the ex-factory realisations from exports would be lower from domestic sales.The absence of price parity already limited the quantity of sugar that could be exported from India. The ban only shuts that window altogether.