India may stay out of sugar export market for years: Report

India could remain largely absent from the global sugar export market for at least the next three seasons as weaker cane production and growing demand for ethanol reduce available supplies, according to Reuters report.

The situation could remove millions of tonnes of sugar from international markets, affecting buyers across Asia, Africa and the West Asia and helping support global sugar prices.

Trade and industry participants told Reuters that lower cane availability and the government’s ethanol-blending programme are expected to leave little surplus sugar for export in the coming years. Several global trading firms have already been alerted to shrinking export opportunities from India, trade sources told Reuters.

India was the world’s second-largest sugar exporter before export restrictions were imposed. A prolonged absence from international markets would further tighten global supplies at a time when weather concerns and biofuel policies are influencing production decisions in major sugar-producing countries.

Export restrictions likely to continue

India exported an average of 6.8 million metric tonnes of sugar annually during the five seasons through 2022-23, accounting for about 10 per cent of global sugar shipments.

This season, however, exports have been limited to around 800,000 tonnes. The government subsequently halted overseas shipments until September 30, when the current sugar season ends.

Government and industry sources familiar with the matter told Reuters that New Delhi is expected to continue managing exports on a season-by-season basis rather than imposing a formal multi-year ban.

According to sources who spoke to Reuters on condition of anonymity, a senior minister in prime minister Narendra Modi’s government last month advised sugar mills to focus on domestic availability and avoid lobbying for export approvals.

India’s Department of Food, Civil Supplies and Consumer Affairs did not respond to requests for comment on export prospects or current restrictions.

Sugar remains a politically sensitive commodity in India, the world’s largest consumer of the sweetener, where it is widely used in households and food products.

“Supplies are already tight in India, and now El Nino is emerging as a major risk,” said Rahil Shaikh, managing director of MEIR Commodities India, a Mumbai-based trader.

“If rains disappoint as forecast, cane planting will suffer and this will keep India out of the sugar export market for at least three years, while Brazil and Thailand could also see their crops affected by El Nino.”

Weak monsoon raises concerns

Weather is emerging as a major concern for the sugar sector.

Forecasts suggest El Nino conditions could reduce India’s monsoon rainfall this year to the lowest level in 11 years. June rainfall has already been running more than 40 per cent below normal, prompting some farmers to postpone planting decisions.

“I had planned to plant long-duration cane varieties in June, but since everyone is talking about lower rains, I decided to put that plan on hold,” said Sambhaji Patil, who switched to soybean cultivation on 2 acres (0.8 hectares) in Maharashtra’s Sangli district.

Suraj Chavan, a nursery owner, said demand for sugarcane seedlings has fallen sharply in recent weeks.

Farmers may increasingly move towards crops that require less water, which could affect sugarcane acreage and supplies in the 2027-28 season, according to Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories.

Authorities in several sugar-growing regions have already begun encouraging cultivation of soybeans, pigeon peas and other pulses, while also restricting irrigation water supplies.

Industry estimates show India’s sugar production was initially expected to reach 30.95 million tonnes this season. Current projections, however, put output at 27.9 million tonnes, below annual consumption of around 28.5 million tonnes.

As a result, sugar inventories held by mills at the beginning of the next season on October 1 are expected to decline to about 3.5 million tonnes, the lowest level in more than three decades, according to Shaikh.

Ethanol demand growing rapidly

At the same time, India’s ethanol programme is increasing competition for sugarcane supplies.

The government is promoting higher ethanol blending in petrol and encouraging adoption of flex-fuel vehicles as part of efforts to reduce reliance on imported crude oil.

Industry estimates indicate ethanol demand could rise from the current 12 billion to 13 billion litres to around 30 billion litres by 2039-40 as blending levels increase and flex-fuel vehicles become more common.

“The trajectory for ethanol demand is incredibly strong,” said Samir Somaiya, chairman and managing director of Godavari Biorefineries.

“The next phase of demand evolution will be driven by the commercial rollout of flex-fuel vehicles.”

This month, Maruti Suzuki launched India’s first flex-fuel passenger vehicle, while Hero MotoCorp introduced a flex-fuel motorcycle.

The government has also removed the production tax on petrol blended with higher ethanol levels and launched fuel containing up to 85 per cent ethanol to encourage wider adoption of flex-fuel technology.

BB Thombare, managing director of Natural Sugar in Maharashtra, said future policy decisions are likely to favour ethanol production over sugar exports.

Imports cannot be ruled out

Some industry participants believe India could eventually return to the import market if weather-related disruptions significantly reduce sugarcane production.

Government sources and industry officials told Reuters that imports may become necessary if El Nino sharply affects cane acreage and yields. Traders also warned that supply pressures could become more severe by the 2027-28 season.

India last imported sugar in 2016-17 and 2017-18 after an El Nino-linked drought in 2015 reduced cane planting. In 2009 and 2010, large Indian sugar purchases helped push global prices to nearly three times previous levels.

“Because of a severe El Nino and rising demand for ethanol, not only would exports from India be wiped out, but imports into India in the coming years could also become necessary,” said Mohan Narang, director of K.S. Commodities, a trading house in New Delhi.

(With inputs from Reuters)