India Extends Sugar Export Restrictions Beyond October 31

In a bid to ensure a sufficient domestic supply of sugar amid growing demand and production concerns caused by a lackluster monsoon season, the Indian government has decided to prolong its sugar export restrictions beyond October 31, 2023.

These restrictions were initially introduced for the 2022-23 season, limiting sugar exports to approximately 6 million tonnes due to a reduction in production caused by delayed rains.

India had already claimed the position of the world’s largest sugar producer and the second-largest exporter, surpassing Brazil in the 2021-22 season.

The Directorate General of Foreign Trade issued a notification stating that the export restrictions for raw, white, refined, and organic sugar would remain in effect until further notice, with all other conditions remaining unchanged. It’s important to note that these restrictions do not apply to sugar exports to the European Union and the United States under the CXL and tariff-rate quota systems, as clarified in the DGFT notification.

As previously reported by Mint on June 2, the government had signaled its intention to maintain control over sugar exports in the 2023-24 season (October-September). In the previous crop year of 2022-23 (July-June), local sugar mills managed to export 6.2 million tonnes of sugar.

The extension of export restrictions for sugar comes in the wake of concerns about this year’s sugar production due to erratic monsoon rains and rising inflation, with several states preparing for upcoming elections ahead of the Lok Sabha election in 2024. The government’s objective is to stabilize kitchen essential prices.

The average retail sugar price in India was recorded at ₹44.03 per kilogram on Tuesday, reflecting a nearly 2% month-on-month increase and a 3.1% year-on-year increase, according to data from the consumer affairs ministry.

An official from the Indian government stated, “Sugar output is expected to fall to 30 million tonnes in the 2023-24 sugar season, against domestic consumption of 27.5-28 million tonnes, due to El Niño compromising monsoon rain in August.” The official also noted, “However, El Niño is anticipated to strengthen through 2023-24, which could lead to intensification of dry conditions during the next sugar season. This may lead to a further decline in sugar production during the 2024-25 season.”

The government’s primary focus is to ensure an adequate supply for domestic consumption, ethanol production, control domestic sugar prices, and maintain optimal closing stocks at the end of the season. India aims to produce 4.5 million tonnes of ethanol from sugar in the current season, which would require increased cane diversion and, in turn, lower closing stocks of sugar.

A slightly higher closing stock will serve as a buffer for the 2024-25 season and help stabilize domestic retail prices, according to the official.