Possible government imposition of sugar export ban
Published on: October 14, 2023.
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Implications of Potential Indian Sugar Export Ban Due to Weakest Monsoon in 5 Years
Owing to the dire consequences of the weakest monsoon in five years on sugarcane crops in Maharashtra and Karnataka, India may re-position its sugar exports as ‘prohibited’ rather than ‘restricted’ for the full 2023-24 season. According to two government officials, the shift would result in a total ban on exports.
“Sugar production is anticipated to decrease to 30 million tonnes (mt) in the 2023-24 sugar season, as compared to domestic consumption of 27.5-28 mt, owing to the El Nino effect reducing the monsoon rain in August,” informed one of the officials.
There are concerns that the dry conditions caused by El Nino could intensify in the 2023-24 season, which could further lower sugar production in the 2024-25 season. The El Nino weather pattern was responsible for the driest August in over a century, with a mere 161.7 mm of rain, the lowest since 1901.
India surpassed Brazil in the 2021-22 season to become the world’s top sugar producer and second-biggest exporter. Despite this, India implemented export controls in October of last year via a mill-wise quota system. By the close of the 2022-23 crop year, local sugar mills had exported 6.2 mt of sugar.
Fear of Domestic Sugar Shortage
As India draws near its crucial elections, the government has heightened export restrictions to keep local prices steady. Similar controls have also been placed on wheat and rice exports.
In the 2022-23 season, India is projected to have produced 32.7-32.8 mt of sugar following the diversion of 4.3 mt for ethanol production – ending the season with 5.5-6 mt in stocks.
Diverting more sugar to ethanol production might result in lower ending stocks. A slightly larger ending stock will help to stabilize domestic retail prices of sugar and serve as a buffer for the 2024-25 season,” the official added.
The government has put focus on maintaining an adequate supply for domestic consumption, keeping domestic sugar prices under control, supporting ethanol production, and ensuring sufficient closing stock at the end of the season.
