According to government officials, India is expected to ban sugar exports during the upcoming sugar season, which starts on 1 October. This decision has been taken to ensure the domestic market is well supplied and keep prices under control.
The government is likely to issue a notification in the first week of November to formalize this ban. In 2021-22, India sold a record 11 million tonnes of sugar, but for 2022-23, the exports have been restricted to around 6 million tonnes.
This quota is being eliminated with the rising prices, and the government's priority is to keep domestic prices low. The below-normal rainfall in the top cane-growing districts of Maharashtra and Karnataka, which account for more than half of India's total sugar output, has been a major factor in this decision.
Although the rainfall situation has improved since August, with the all-India deficit coming down from 10 percent to 5 percent, there are still concerns about the fall in sugarcane production.
In recent years, India, which is the world's second-largest sugar producer and a major exporter, has been using more and more of the country's sugarcane crop to make ethanol, as it is pushing fuel plants to start production. In the current sugar season of 2022-23, around 45 LMT of excess sugar has been diverted to ethanol. The government has targeted to divert more than 60 LMT of excess sugar to ethanol production by 2025.
India is facing the challenge of a potential fall in the output of key staples due to uneven rainfall, as well as an exponential rise in food prices, leading to elevated headline retail inflation.
The prices of sugar have remained high, with an increase of about 2.5 percent as of September 28 compared to a month ago, according to ministry of consumer affairs data. The Consumer Price Inflation (CPI) for sugar was recorded at 3.8 percent in August.
The international prices of the commodity also remain elevated, with the FAO Sugar Price Index averaging 148.2 points in August, up 1.9 points (1.3 percent) from July and as much as 37.7 points (34.1 percent) from its level in the same month last year.
The increase in world sugar prices was mainly triggered by concerns over the impact of the El Niño weather phenomenon on global production prospects, as below-average rains in August were detrimental to sugarcane crop development in India, according to FAO.