India Likely to Ban Sugar Exports in New Season Beginning October

India Likely to Ban Sugar Exports in New Season Beginning October

Ira Singh
1 Oct’23

In a significant development that could have far-reaching implications for the global sugar market, India is reportedly considering a ban on sugar exports for the upcoming season starting in October.India is likely to ban sugar exports during the upcoming season, starting October 1, government officials told Moneycontrol on September 28. A notification in this regard can be expected in the first week of November, they added,as per media reports.

The sugar season starts in October of a year and ends in September the next year.

After selling a record 11 million tonnes (MT) of sugar in 2021-22, India restricted the amount of exports during 2022-23 to ensure supply in domestic markets and keep a lid on prices.

“In the beginning of the 2022-23 sugar year, the government restricted sugar exports to around 6 MT. Even this quota is being eliminated with rising prices. Our main priority is to keep domestic prices low,” an official told Moneycontrol.

Below-normal showers in the top cane-growing districts in the western state of Maharashtra and the southern state of Karnataka, both of which account for more than half of India’s total sugar output, had been as much as 50 percent below average till August this year.

While the rainfall situation has since improved with the all-India deficit coming down from 10 percent on August 31 to 5 percent on September 25, fears of a fall in production cannot be erased.

Niti Aayog member Ramesh Chand had expressed worries over sugarcane production in an interview with Moneycontrol on August 16, stating that though India had “good production” of sugarcane, a significant chunk of it was used to build capacity for ethanol.

India, the world’s second-largest sugar producer and a major exporter in recent years, has been using more and more of the country’s sugarcane crop to make ethanol as it is pushing fuel plants to start production.

In current sugar season 2022-23, about 45 LMT of excess sugar has been diverted to ethanol. By 2025, the government has targeted to divert more than 60 LMT of excess sugar to ethanol production, according to sources.

Inflation worries

India is grappling with a potential fall in the output of key staples due to uneven rainfall as well as an exponential rise in food prices. Headline retail inflation, which came in at a 15-month high of 7.44 percent in July, is expected to stay elevated in the next few months.

The prices of sugar have remained elevated, up about 2.5 percent as on September 28, compared to a month back, according to ministry of consumer affairs data. The Consumer Price Inflation (CPI) for the commodity was recorded at 3.8 percent in August.

International prices of the commodity also remain elevated with the FAO Sugar Price Index averaging 148.2 points in August, up 1.9 points (1.3 percent) from July and as much as 37.7 points (34.1 percent) from its level in the same month last year.

The increase in world sugar prices was mainly triggered by heightened concerns over the impact of the El Niño weather phenomenon on global production prospects, FAO says. “In India, below-average rains in August were detrimental to sugarcane crop development,” it has noted.