India is set to allow the export of 1 million metric tons of sugar during the current season, according to government and industry sources. This move seeks to help sugar mills offload surplus stocks, stabilise local prices, and support an industry dealing with low domestic rates.
The decision comes as sugar production in the country declines and as the government ramps up efforts to expand ethanol production, aligning with its energy independence goals.
India’s decision to permit exports could exert downward pressure on global sugar prices, already volatile due to fluctuating production in major sugar-producing countries.
India was the world’s second-largest sugar exporter during the five years leading up to 2022-23, averaging 6.8 million tons of annual exports. However, the country did not permit exports in the 2023-24 marketing year due to domestic concerns.
With markets like Indonesia, Bangladesh, and the UAE among its key buyers, India’s limited export allowance this year marks a significant shift in its trade strategy.
The Indian Sugar and Bio-energy Manufacturers Association (ISBMA) has welcomed the decision. “This is good news for the sugar industry, especially with next year’s production likely to be robust,” said Deepak Ballani, Director General of ISBMA.
Local sugar prices, at their lowest levels in 18 months, have been a major concern for mills. The export allowance is expected to offer some relief by enabling mills to manage surplus stocks more effectively.
Domestically, however, the policy is expected to offer some relief to mills by enabling them to manage surplus stocks amidst declining local prices, which are at an 18-month low.
Why does sugar production matter?
Union Minister Nitin Gadkari recently announced that India is on track to achieve its target of 20 per cent ethanol blending within the next two months, highlighting the government’s commitment to reducing crude oil imports. Ethanol derived from sugarcane and other agricultural products is playing a pivotal role in this transition, with sugar mills increasingly diverting sugarcane towards ethanol production.
This shift is reflected in rising ethanol-linked investments and the performance of sugar companies in the stock market. Notable gains were recorded by major sugar producers such as Dhampur Sugar Mills, Shree Renuka Sugars, and Dwarikesh Sugar Industries. Praj Industries, a leading player in ethanol production technology, also saw significant stock market advances.
Declining Sugar Production and Exports
India’s sugar production for the 2024-25 crushing season is expected to fall to 27 million tons, down from 32 million tons last year and below the annual domestic consumption of over 29 million tons. According to the National Federation of Cooperative Sugar Factories (NFCSF), production as of January 15 stands at 13.06 million tons, a 13.66 per cent drop compared to the same period last year.
This decline is due to lower sugarcane yields in major producing states such as Maharashtra, Karnataka, and Uttar Pradesh, which account for more than 80 per cent of India’s sugar output. Additionally, approximately 4.5 million tons of sugar are expected to be diverted for ethanol production this season, further impacting overall availability.
Shifting Dynamics in India’s Sugar Trade
Despite a history of being the world’s second-largest sugar exporter, with an average annual export volume of 6.8 million tons between 2018 and 2023, India restricted exports entirely during the 2023-24 marketing year. This year’s limited export allowance signals a shift in policy, balancing domestic supply concerns with international trade objectives.
The growing adoption of ethanol-blended fuels and the production of vehicles capable of running on 100 per cent bio-ethanol by leading manufacturers such as Tata Motors, Mahindra & Mahindra, and Hyundai Motors underline India’s commitment to sustainable energy solutions.
While the sugar export allowance offers immediate relief to mills, the increased diversion of sugarcane towards ethanol production marks a long-term shift in the industry. This dual strategy of managing surplus stocks through limited exports and enhancing ethanol production to meet energy goals is poised to redefine India’s sugar sector dynamics in the years ahead.
India’s sugar and ethanol strategy highlights its balancing act: addressing domestic production challenges, supporting the global sugar market, and advancing its renewable energy ambitions. The combined focus on exports and ethanol reflects a pragmatic approach to achieving economic and energy sustainability.
(With agency inputs)