Why India may ban sugar exports for first time in seven years

India is reportedly ready to ban sugar exports for the next season starting October. According to a Reuters report, the step, the first such in seven years, comes as scanty rainfall has slashed cane yields in the top sugar crop-growing states. Earlier in July, India prohibited the export of non-basmati white rice in a bid to control domestic prices, stoking further inflation fears in the global food markets. Let’s take a closer look at why India is likely to ban sugar exports for the 2023-24 (October-September) period. India may ban sugar exports Multiple government sources confirmed to Reuters news agency that the Indian government is expected to ban mills from exporting the sweetener in the next season. The report also predicted that sugar production in India could plummet 3.3 per cent to 31.7 million tonnes (mt) in the 2023-24 season. “Our primary focus is to fulfil local sugar requirements and produce ethanol from surplus sugarcane,” a government source told the news agency. “For the upcoming season, we will not have enough sugar to allocate for export quotas.” Previously, the Centre capped the exports to 6.1 million tonnes of sugar for the current season ending 30 September, down from 11 million tonnes the year before. “We’ve allowed mills to export large volumes of sugar during the past two years,” another government source told Reuters. “But we also have to ensure sufficient supplies and stable prices.” [caption id=“attachment_13035072” align=“alignnone” width=“640”] India is expected to ban mills from exporting sugar. Reuters File Photo[/caption] Domestic sugar prices this week climbed to their highest level in about two years, as per the news agency. This year, Maharashtra and Karnataka, the top cane-growing states, have received 50 per cent below-average rainfall so far, Reuters reported citing the data from the weather department. Speaking to Bloomberg in early August, Aditya Jhunjhunwala, president of the Indian Sugar Mills Association (ISMA) – an association of private mills – said, “Sugar cane fields in the main producing regions of Maharashtra and Karnataka didn’t get adequate rain in June, leading to crop stress”. Several Indian media reports have indicated earlier that the Centre is likely to halt sugar exports. As per a Mint report in June, the department of food and public distribution was unlikely to allow Indian mills to export sugar in the 2023-24 season beginning October to rein in domestic prices and ensure adequate supply. “People who are expecting that the government will announce sugar export quota with the beginning of the new season from October, they should drop the thought," Mint quoted a senior government official as saying. “There will be no deliberations on sugar exports until we receive the advance estimates of sugar production or initial cane assessment for the next season." ALSO READ: Will India’s rice export ban cause surge in prices globally? Is there no fall in sugar production? In early August, the Centre dismissed ISMA’s estimates of a fall in sugar production for the next season to 31.68 million tonnes from the expected 32.8 million tonnes in the current season. “We expect sugar production (after diversion towards ethanol) to be around 32.5 mt, which is almost at par with ongoing season ending 30 September,” a senior food ministry official said, as per BussinessLine. He also said that sugar exports may be curbed till at least 31 March 2024 which will increase domestic availability. “In fact, we assume 5-5.5 mt may be diverted towards ethanol against about 4 mt this season,” the official added. [caption id=“attachment_13035102” align=“alignnone” width=“640”] Surplus sugarcane will be diverted for ethanol production. Reuters File Photo[/caption] As per BusinessLine, food secretary Sanjeev Chopra said at the time, “This, we thought is creating some sort of panic that there is a shortage of sugar in the country. We thought we must clarify. It is highly premature to assess what will be sugar production in the next harvest beginning October.” According to the Bloomberg report, ISMA believes the Central government may divert 4.5 million tonnes of sugar for ethanol production, a 9.8 per cent rise from the previous year. How sugar export ban will affect global prices According to the International Sugar Organization, India is the second-largest exporter of sugar after Brazil. An export ban by India could uplift benchmark prices in United States’ New York and London in the United Kingdom, leading to further inflation concerns in global food markets, reported Reuters. A Mumbai-based dealer told Reuters that Brazil is unlikely to fulfil the gap alone created by India’s absence as a lower sugar output was expected in Thailand, another top exporter of the sweetener. Last May, India banned wheat exports to control rising domestic prices. In July this year, the Central government stopped the export of non-basmati white rice amid concerns about a supply shortage in the country due to heavy rains damaging paddy crops in Punjab and Haryana. Earlier this week, food secretary Chopra clarified that India is not mulling restrictions on the exports of non-basmati parboiled rice. Last September, India had stopped the shipments of broken rice, along with imposing a 20 per cent duty on exports of various grades of the grain. Meanwhile, the Ministry of Finance has also imposed a 40 per cent export duty on onions amid a steep rise in domestic prices. In July, food inflation surged to 11.5 per cent in India, the highest in over three years. With inputs from agencies