India’s ban on sugar exports: Everything you need to know

The government has taken a significant step toward maintaining the price and availability of sugar in the country by putting restrictions on sugar export. The restrictions will come into effect from June 1, 2022. Sugar exports are not entirely prohibited. The traders have to get specific permission to export sugar from the Directorate of Sugar, Department of Food and Public Distribution. 

According to the orders, until October 31, 2022, or further notice, the exports will be permitted only with a specific order from the Directorate of Sugar, Department of Food and Public Distribution. 

According to the notice, these restrictions will not apply to sugar exported to the EU (European Union) and the US (United States) under CXL and TRQ. But a certain amount of sugar is exported to these two regions.

Sugar exports are limited to 100 LMT (lakh metric tonnes).

Sugar export restrictions are implemented for the first time in six years. The country last restricted sugar exports by imposing a 20% export duty in 2016.

What will be the impact on the market?

A smaller cane crop in Brazil, the world’s largest producer, and high global oil prices have boosted overseas demand for Indian sugar. India’s export restrictions will send international prices skyrocketing in the midst of a global commodities price slump.

According to Union Commerce Minister Piyush Goyal, Sugar export regulations should not affect global markets because India will continue to allow exports to vulnerable countries. 

According to reports, the government has also formed a cross-ministerial panel to monitor imports of all commodities, particularly industrial raw materials.

Why is the government limiting exports?

The government is worried about a lack of stock at the start of the next season, which begins in October. According to reports, a shortage of backup stocks during this period could drive up prices in the domestic market.

The restrictions were put in place to increase sugar availability in the domestic market while also limiting price increases.

Combined with the May 13 ban on private wheat exports, these actions signal an aggressive approach to taming out-of-control inflation. 

Consumer prices in April soared to an eight-year high of 7.79 per cent, far exceeding the Reserve Bank’s tolerance limit of 6% for four months in a row, threatening growth and fueling public anxiety.

Export restrictions will free up more surplus sugar for domestic ethanol production, for which the country has set new fuel blending targets. It is a top government priority. Blending petrol with ethanol, which is made from molasses, a sugar byproduct, will help reduce oil imports.

Sugar mills are being encouraged to divert surplus sugarcane to ethanol production by the government.

According to the World Bank, Russia’s invasion of Ukraine has shaken commodity markets, which will keep global prices high until the end of 2024.

Sugar production and exports

In the current marketing year 2021-22, sugar production in India has increased by 14% to 34.2 million tonnes (MT) and is expected to reach a new high of 35.5 MT. Sugar production in the country was 31.1 metric tonnes in 2020–21, 25.9 metric tonnes in 2019–20, 32.2 metric tonnes in 2018–19, and 31.2 metric tonnes in 2017–18.

For the first time, India has achieved a net sugar production record of 34.2 million tonnes until April 2022.

India’s sugar exports increased by 15 times, to 70 lakh tonnes in 2021-22.

According to the Ministry of Consumer Affairs and Food Distribution, during the sugar season 2020–21, about 70 lakh metric tonnes (LMT) were exported, compared to a target of 60 LMT.

According to the report, the top importers are Indonesia, Afghanistan, Sri Lanka, Bangladesh, the United Arab Emirates, Malaysia, and other African countries.

Millers have signed deals to export 90 lakh tonnes of sugar in the current season (2021-22). Seventy-one lakh tonnes of sugar have already been exported from the country.

Restriction on Wheat Exports

Due to record-high domestic inflation, India has prohibited wheat exports and a severe heatwave that ruined the crop. 

Politicians and world leaders have reacted to the decision, with many requesting and urging India to reconsider its wheat export ban.

However, India is not one of the world’s top wheat exporters. India’s ban is unlikely to push global prices to new highs due to already tight supply, putting poor consumers in Asia and Africa at risk.

Food trade restrictions in other countries

While India’s wheat export ban has gotten a lot of attention, it isn’t the only country with food trade restrictions.

Export restrictions have also been imposed by Egypt, Turkey, and Kuwait.

Malaysian Prime Minister Ismail Sabri Yaakob announced that the country would stop exporting up to 3.6 million chickens per month until domestic prices and production levels stabilised.

Palm oil prices had previously risen in recent weeks after Indonesia, the world’s largest producer of ingredients used in everything from processed foods to soap, halted exports for three weeks to lower local cooking oil prices. On Monday, the ban was lifted.