In a move to ensure adequate domestic supplies and stabilize prices, the Indian government has extended the restrictions on sugar exports beyond the previously set date of October 31. This decision comes in the wake of concerns about higher domestic demand and potential output issues in major sugar-producing states, which experienced the weakest monsoon season in five years.
The Directorate General of Foreign Trade (DGFT) announced the extension in a recent notification, emphasizing that the curbs are in place to prevent uncontrolled exports and ensure sufficient sugar availability for domestic consumption at reasonable prices. However, the restrictions will not apply to sugar exports to the European Union and the US under the CXL and tariff-rate quota systems.
Last year, India, which had surpassed Brazil to become the world's largest sugar producer and the second-largest exporter, imposed export controls in October. The country adopted a mill-wise quota system, allowing mills to export only 6.1 million tonnes of sugar during the current season ending on September 30. This was a significant reduction from the record 11.1 million tonnes allowed in the previous season.
The decision to extend the export restrictions is also influenced by erratic monsoon patterns. Monsoon rains in key sugarcane-growing districts of Maharashtra and Karnataka, which together contribute to over half of India's total sugar output, have been up to 50% below average this year. As a result, the Indian Sugar Mills Association (ISMA) anticipates a 3.3% drop in sugar production, estimating a total output of 31.7 million tonnes for the 2023/24 season.
Furthermore, the government's decision is also driven by the need to maintain stable domestic sugar prices, especially with several states heading for polls in the coming month and the Lok Sabha election scheduled for 2024. As of Tuesday, the all-India average retail sugar price stood at ₹44.03 per kilogram, marking a nearly 2% month-on-month increase and a 3.1% year-on-year rise.
The government's overarching goal is to ensure a steady supply for domestic consumption, support ethanol production, and maintain optimal closing stock levels by the season's end. India aims to produce 4.5 million tonnes of ethanol from sugar this season, necessitating higher cane diversion and resulting in lower closing stocks of sugar. A slightly elevated closing stock will help contain domestic retail prices and serve as a buffer for the 2024-25 season.
