Given that the global food prices are already on the verge of reaching multi-year highs, any further increases may result in higher food inflation globally.
Last month, India banned the export of non-basmati white rice, and the Government Of India (GOI) imposed a 40% duty on exports of onions in the previous week in order to control domestic prices.
India ranks as the second larget exporter of sugar following Brazil.
GOI’s Plans For Sugar Exports
According to government sources, India may be considering banning the export of sugar in the upcoming season, which will start in October, after prohibiting the exports of rice and onions.
In the previous season, India's sugar mills sold a record 11.1 million tonnes of sugar, and the current season, which ends in September, the nation sold about 6.1 million tonnes of sugar. In order to control overseas sales, India previously imposed a 20% tax on sugar imports in 2016.
The export ban would be the first in the previous seven years if it were to be put into effect.
According to three government sources quoted in a Reuters report, the government is considering prohibiting sugar mills from exporting their products because the lack of rain in the current season has significantly reduced sugarcane output.
The benchmark prices in New York and London might rise as a result of this decision. Notably, the report pointed out that global prices are already on the verge of multi-year highs and that any further acceleration could lead to increased inflation in the world's food markets.
Motives For Changes In Policy
According to an anonymous Government source quoted by Reuters, “The primary focus is to fulfill the nation’s local sugar requirements and also to produce ethanol from the sugarcane surplus. During the upcoming season, there will not be enough sugar to allocate for export quotas.”
So far this monsoon season, rainfall in the sugarcane-growing areas of Maharashtra and Karnataka has been nearly 50% below average. More than half of the nation's sugar buyer is from these regions.
As stated in the report by another unnamed industry official, “Patchy rains would cut sugar output in the 2023–24 season and even reduce planting for the 2024–25 season.” Notably, it is anticipated that the nation will produce 3.3% less sugar in the 2023–24 season, totaling 31.7 million tonne.
According to the report, domestic sugar prices rose to their highest level in nearly two years, urging the government to approve the sale of an additional 200,000 tonnes of the commodity by mills in August.
The report also stated by citing another government source, “Food inflation is a concern. The recently increased sugar prices eliminates further possibility of exports.” Retail inflation in India reached a 15-month high of 7.44% in July, and food inflation reached a three-year high of 11.5% last month.
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