India considers sugar export policy ban as production dips

The government reportedly plans to ban sugar exports due to a decline in production and concerns about potential inflationary pressures in the 2024 Lok Sabha elections. A committee of ministers, including the Union Finance Minister Nirmala Sitharaman and the Minister of Commerce and Industry Piyush Goyal, has advised mills to cease sending sugar overseas with immediate effect. The government is expected to announce a restriction on shipments shortly.

Reports indicate that there is currently enough sugar to meet the estimated domestic consumption demand of 275 lakh tonnes or 27.5 million tonnes. However, with state elections this year and the Lok Sabha elections in March-April 2024, the government is reportedly unwilling to take any chances. PTI reported earlier this month that the government may not allow additional sugar exports this year due to unseasonal rains that hit production.

India's sugar exports were valued at a record $5,770.64 million in the 2022-23 fiscal year ending in March, up from $4,602.65 million in 2021-22. The country mostly exports sugar to Indonesia, Bangladesh, Malaysia, Sudan, Somalia, and the United Arab Emirates. The food ministry approved exporting 6 million tonnes of sugar in the marketing year ending on September 2023, of which 4 million tonnes have already been exported.

The Indian Sugar Mills Association (ISMA) had expected a sugar output of 34 million tonnes in the ongoing season ending on 30 September. However, unseasonal showers in major sugar-producing states such as Maharashtra and Uttar Pradesh owing to Western Disturbances led to a fall in sugar cane yields. Sugar production in Maharashtra fell from 13.7 million tonnes in the previous year to 10.5 million tonnes this year, while the output in Uttar Pradesh is expected to reduce marginally to 10 million tonnes compared to 10.2 million tonnes in the previous year. The output in Karnataka is also expected to drop to 5.5 million tonnes from 6.2 million tonnes during the same period, according to PTI.

Despite the fall in sugar production, there are reportedly ample supplies in the country to fulfill local consumption of 27.5 million tonnes. India's sugar exports touched a record 11.2 million tonnes in the 2021-2022 crop season. If India limits its exports, it could increase global rates, and rival sugar-producing nations could boost their foreign trade.

According to statistics from the Department of Consumer Affairs, sugar's average retail price throughout India on Friday was Rs 42.24 per kg, which was somewhat higher than a year earlier when it was Rs 41.31. The country is expected to produce 327 lakh tonnes (LT) of sugar during the 2022-23 crop year (October-September), down from the 359 lakh tonnes produced during the previous crop year.

International raw sugar prices have recently touched an 11-year high, their highest levels since 2011. Unlike most other commodities that have cooled down, sugar is the only commodity that has climbed upwards. Several factors have contributed to the rapid increase in sugar prices over the last year, mainly a decline in supply.