31.1 C
Saturday, June 3, 2023

Explainer: How unseasonal rainfall may lead to India banning sugar exports

India is a major player in the global sugar market, both as a producer and an exporter. However, the country’s sugar output is expected to drop due to heavy rains that damaged the sugarcane crop. To ensure enough domestic supply and stable prices, the government is likely to ban sugar exports soon. Here are some key points to understand this issue.

What is the status of sugar production and export in India?

India is the world’s largest producer of sugar and the second-largest exporter after Brazil. The food secretary Sanjeev Chopra said that India’s sugar output is likely to be 32.8 million tonnes in the 2022-2023 marketing year (October-September), which is 3.5 per cent lower than the previous estimate of 38.6 million tonnes1. The main reason for this shortfall is the heavy rainfall that affected the sugarcane crop in Maharashtra, the top sugar-producing state in the country.

India also exports a large amount of sugar to other countries. The government had approved exporting 6 million tonnes of sugar in the current marketing year, out of which 4 million tonnes have already been shipped. Around 5 million tonnes of sugar will be diverted for ethanol production this year, a significant increase from 3.6 million tonnes in the previous year.

Why does the government want to ban sugar exports?

The government is concerned about the availability and price of sugar in the domestic market, especially before the state assembly elections this year and the Lok Sabha elections next year. The retail inflation in April surged to an eight-year high of 7.79 per cent, and the government does not want to risk any increase in sugar prices.


The government also wants to make sure that there are enough stocks at the start of the next season, which begins in October. A lack of backup stocks during this time can push prices in the domestic market.

Therefore, the government has decided to ban sugar exports with immediate effect, as per a report by Indian Express. The decision was taken at a meeting convened on 27 April by a panel of ministers, including Union finance minister Nirmala Sitharaman and commerce & industry minister Piyush Goyal1. The government is expected to issue a notification on banning shipments of sugar soon.

How will this affect the sugar industry and the global market?

The ban on sugar exports will have an impact on both the domestic and international markets. On one hand, it will help maintain the domestic supply and price stability of sugar, which is a politically sensitive commodity in India. It will also benefit the farmers who grow sugarcane, as they will get timely payments from the mills.

On the other hand, it will hurt the sugar mills that rely on exports for their revenues and cash flows. The mills have invested heavily in increasing their ethanol production capacity, which requires more working capital. The ban on exports will reduce their income and liquidity.


The ban will also affect the global market, as India is a major supplier of sugar. The global sugar prices have already risen due to lower production in Brazil and Thailand, and higher demand from China and Indonesia2. The ban will create a supply gap in the world market, which may push prices further up. This may benefit other exporters like Brazil and Australia, but may hurt importers like Bangladesh and Sri Lanka.

What are some possible alternatives or solutions?

The government may consider some alternatives or solutions to balance the domestic and international interests of the sugar industry. For example:

  • The government may allow some exports under specific conditions or quotas, instead of a complete ban. This may help the mills to earn some revenues and clear their dues to farmers.
  • The government may provide some incentives or subsidies to the mills for producing more ethanol from sugarcane juice or molasses. This may help them reduce their surplus stocks of sugar and diversify their income sources.
  • The government may monitor the domestic and global market situation closely and review its decision periodically. This may help it adjust its policy according to changing circumstances and demands.

Support Us

Secured by Paypal

Related Stories

Check out other tags:

Most Popular Articles