Explained: Why India is likely to ban sugar exports

India is likely to ban the exports of sugar amid a fall in production of the sweetener. The country is expected to produce 32.8 million tonnes of sugar in the 2022-2023 marketing year, 3.5 per cent lower than the earlier forecast, as per media reports.

In view of this decline in output and to avoid a hike in prices domestically ahead of the Lok Sabha elections next year, the Centre is set to ban sugar exports, according to an Indian Express report.

Let’s take a closer look.

India may halt sugar export

The Central government is expected to issue a notification on banning shipments of sugar soon, sources told Indian Express.

The decision was taken on the matter at a meeting convened on 27 April by a panel of ministers, including Union finance minister Nirmala Sitharaman and commerce & industry minister Piyush Goyal, which recommended stopping mills from exporting sugar with “immediate effect”, the report added.

“There is enough sugar at present to meet the estimated domestic consumption demand of 275 lakh tonnes or 27.5 million tonnes. But the government does not want to take any chances ahead of elections to both state assemblies this year and the Lok Sabha in March-April 2024,” the sources were quoted as saying by Indian Express.

India is expected to produce 32.8 million tonnes of sugar in the 2022-2023 marketing year. Reuters File Photo

“The government has already capped exports at 6.1 million tonnes for the current season. The ban would, then, effectively apply only on 3 LT, but will have an impact on market sentiment and check any inflationary trend,” the sources further said.

Earlier this month, PTI reported citing food secretary Sanjeev Chopra that the government may not allow additional sugar exports this year due to unseasonal rains that hit production.

“We have a sugar production target of 38.6 million tonnes (including diversion for ethanol). Maybe production will go down by 2-3 lakh tonnes due to unseasonal rains in Maharashtra,” Chopra had said.

Due to the expected decline in sugar output, “additional sugar export quota is unlikely to be allowed”, he added.

Around 5 million tonnes of sugar will be transferred for ethanol production this year, a major hike from 3.6 million tonnes in the previous year.

According to the trade report, the food ministry has approved exporting 6 million tonnes of sugar in the marketing year ending on September 2023. Out of this, 4 million tonnes have already been exported.

India mostly exports sugar to Indonesia, Bangladesh, Malaysia, Sudan, Somalia and United Arab Emirates.

The country’s sugar exports were valued at a record $5,770.64 million in the 2022-23 fiscal year ending March, as compared to $4,602.65 million in 2021-22, reported Indian Express.

Fall in sugar output

Indian Sugar Mills Association (ISMA) was expecting 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.

“Rainfall was erratic. Sugar cane crop didn’t get ample rainfall during the growth phase and got too much when it wasn’t required,” Aditya Jhunjhunwala, president of the ISMA, told Reuters.

Sugarcane yields were affected due to unseasonal rainfall. Reuters File Photo

Maharashtra produced only 10.5 million tonnes of sugar, as against 13.7 million tonnes a year ago, he added.

Sugar production in Uttar Pradesh is expected to marginally reduce to 10 million tonnes, as compared to 10.2 million tonnes in the previous year. The output in Karnataka is expected to drop to 5.5 million tonnes, as against 6.2 million tonnes during the same period, PTI reported.

“This reduction is not providing space for additional exports from the country,” Jhunjhunwala explained.

India’s sugar export had touched a record 11.2 million tonnes in the 2021-2022 crop season.

If India, the world’s second largest exporter of sugar after Brazil, limits its exports, it could increase global rates. It would also allow rival sugar producing nations to boost their foreign trade.

Will fall in output affect domestic supply?

Not likely.

According to Jhunjhunwala, “Despite the drop in sugar production, there is ample supplies in the country to fulfil local consumption of 27.5 million tonnes”, Reuters reported.

With inputs from agencies

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