India plans to restrict sugar exports for the first time in six years to prevent a surge in
domestic prices and could cap this season’s exports at 8 million
tonnes, government and industry sources told Reuters.
An announcement could come early next month, they said.
Shares in sugar manufacturers slid on the news, with Dhampur
Sugar Mills and Balrampur Chini each tumbling 5% and Dwarikesh Sugar losing 6%.
“Sugar output is going to be a record high, but stocks are
depleting fast because of exports. Uncontrolled exports could
create scarcity and local prices could spike during festive
season,” said a senior government official with knowledge of the
matter who asked not to be identified.
Two of three sources said the government has planned a cap
of 8 million while one official said the government is also
exploring the option of a levy on exports to discourage overseas
sales.
India’s Ministry of Commerce and Industry did not
immediately respond to a request for comment.
A cap of 8 million tonnes for the marketing year to
end-September could result in a de facto ban for exports from
May as dealers say mills have already contracted to export 7
million tonnes so far.
Based on March deals for about 1 million tonnes of exports,
they estimate mills could sign contracts for another 1 million
tonnes in April after global white sugar prices
jumped to a 5-year high on Thursday.
Lower output in top producer Brazil and firm oil prices
which encourage mills to produce more sugarcane-based ethanol
have spurred global price gains. Export curbs by India, the
world’s No. 2 sugar exporter, would likely further lift prices.
Earlier projections estimated domestic sugar stocks as of
October 1 could fall to a five-year low of 6.8 million tonnes due
to record exports, but those forecasts now look optimistic after
the rise in global sugar prices.
“New Delhi is keen to start the new season with opening
stock of 6 to 7 million tonnes, which is enough to fulfill
December quarter demand,” an industry official said.
Demand usually jumps during the December quarter due to
weddings and festivals such as Diwali and Dussehra.
Any sugar exports curbs would the first since India imposed
a 20% tax in 2016 and would represent an about-face for a
government which until last year was providing subsidies for
mills that were struggling to make cane payments to farmers due
to record stockpiles.
But bumper exports of more than 14 million tonnes over two
years now mean that New Delhi’s priorities have switched to
producing enough sugar to meet local demand.
“Government policy is clear. Produce enough sugar to fulfill
local demand and make as much ethanol as possible from remaining
surplus sugar cane. Don’t rely on exports as global prices are
volatile,” said a policymaker who declined to be identified.
The government is also naturally concerned about food
inflation as prices of essential commodities such as edible oils
and grains are rising in the wake of Russia’s invasion of
Ukraine, said a Mumbai-based dealer with a global trading firm.
In the past, the government was embarrassed to import sugar
at higher prices after exporting record quantities, the dealer
said but added he didn’t think the government would be reticent
about imports now if it really needed to.
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