India Considers Sugar Export Ban Amidst Supply Concerns Starting From Oct 1

In a bid to ensure sufficient domestic supply and control soaring prices, India is reportedly contemplating a ban on sugar exports for the upcoming sugar season, starting on October 1. Government officials have indicated that an official notification regarding this matter could be expected in the first week of November.

The decision to restrict sugar exports comes on the heels of India's efforts to stabilize its sugar market. After a record-breaking 11 million tonnes of sugar were sold during the 2021-22 season, the Indian government took measures to limit exports in the 2022-23 season, initially setting an export quota of around 6 million tonnes. However, even this quota is now being phased out as a result of rising prices.

An unnamed official stated, "Our main priority is to keep domestic prices low," reflecting the government's commitment to ensuring affordable sugar for its citizens.

One of the significant factors contributing to these export restrictions is the weather-related challenges faced by India's sugarcane crop. Below-average rainfall in the top cane-growing regions of Maharashtra and Karnataka, which together account for more than half of India's total sugar output, has been a concern. Rainfall in these regions was as much as 50 percent below the long-term average until August this year. Although the rainfall situation has improved since then, fears of a production decline persist.

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Ramesh Chand, a member of India's policy think tank Niti Aayog, had previously voiced concerns about sugarcane production, noting that a substantial portion of the crop was being diverted to ethanol production. India has been increasingly using its sugarcane crop to manufacture ethanol, as part of its efforts to promote cleaner fuels.

In the current sugar season (2022-23), approximately 45 million tonnes of excess sugar have been redirected toward ethanol production. The government has set a target to divert more than 60 million tonnes of surplus sugar to ethanol production by 2025.

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This move to ban sugar exports aligns with India's broader challenge of managing food prices and agricultural production amid erratic rainfall patterns. The country has experienced uneven rainfall, impacting staple crop yields and contributing to a spike in food prices. Headline retail inflation reached a 15-month high of 7.44 percent in July and is expected to remain elevated in the coming months.

As of September 28, sugar prices in India have increased by approximately 2.5 percent compared to the previous month, according to data from the Ministry of Consumer Affairs. The Consumer Price Inflation (CPI) for sugar stood at 3.8 percent in August.

Internationally, sugar prices have also remained elevated, with the FAO Sugar Price Index averaging 148.2 points in August. This represents a 1.3 percent increase from July and a significant 34.1 percent surge compared to the same period last year. The rise in global sugar prices has been attributed to concerns over the impact of the El Niño weather phenomenon on global sugar production, with below-average rains in India adversely affecting sugarcane development.

In light of these challenges, India's decision to consider a sugar export ban underscores its commitment to prioritize domestic food security and price stability, especially during periods of weather-related uncertainty and rising inflation.

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