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India mulls imposing ban on sugar exports due to weakest monsoon in five years

India is considering moving sugar exports from the ‘restricted’ category to the ‘prohibited’ category for the entire 2023-24 (October-September) season. This decision stems from concerns about the adverse effects of the weakest monsoon in five years on sugarcane crops in the prominent producing states of Maharashtra and Karnataka, as conveyed by two government officials.

Currently, sugar mills have the option to request an export quota within the restricted category. However, transitioning to the prohibited category would entail a complete prohibition on sugar exports.

“Sugar output is expected to fall to 30 million tonnes (mt) in the 2023-24 sugar season against domestic consumption of 27.5-28 mt due to El Nino compromising monsoon rain in August,” one of the officials said. “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 official added.

The El Nino weather phenomenon rendered August the driest month in over a century, with only 161.7 mm of rainfall, marking the lowest precipitation levels since 1901.

In the 2021-22 season, India, which had surpassed Brazil to become the world’s largest sugar producer and the second-largest exporter, imposed export controls in October of that year, implementing a mill-specific quota system. By the end of the 2022-23 crop year, local sugar mills had exported 6.2 million metric tons of sugar.

On June 2nd, it was reported that the food and public distribution department might not grant sugar mills unrestricted authority to export sugar, aiming to maintain domestic supply and price stability. Following this, on August 29th, there were reports that the government would reevaluate its sugar export policy, presently categorized as restricted. This review is scheduled for October, following the submission of crop estimates for the 2023-24 season by state cane commissioners.

As India approaches critical elections, the government has intensified export restrictions in an effort to stabilize domestic prices. In addition to sugar, India has also imposed restrictions on the export of wheat and rice.

During the 2022-23 season, India is projected to have generated approximately 32.7-32.8 million metric tons of sugar, with 4.3 million metric tons of the commodity diverted for ethanol production. The season is expected to conclude with 5.5-6 million metric tons in stocks.

“More diversion of sugar to ethanol production may lead to lower closing stocks. A slightly higher closing stock will help contain domestic retail prices of sugar and will be used as a buffer for the 2024-25 season,” the official said.

“The government does not want to take a risk as its priority is to ensure adequate supply for domestic consumption, keep domestic sugar prices in check, ethanol production and adequate closing stock at the end of the season,” the second official said.

At the time of the press deadline, inquiries directed to the representatives of the ministries responsible for commerce, agriculture, consumer affairs, and food and public distribution received no response.

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