Government Allows Sugar Mills to Export up to 60 LMT of Sugar to Balance Price Stability

In the last six years, the government has taken numerous and timely initiatives in the sugar sector, allowing sugar mills to stand on their own and become self-sufficient. During SS 2022-23, sugar mills received no subsidies for sugar production/marketing, and the country's sugar sector is expected to perform well despite no financial support from the Government of India.

Based on initial estimates of sugarcane production, the Government of India has allowed export of sugar up to 60 LMT during the sugar season 2022-23 as another measure to balance the price stability of sugar in the country and the financial positions of sugar mills in the country. The DGFT has already announced that sugar exports will be included in the 'Restricted' category until October 31, 2023.

The Central Government has prioritised the availability of approximately 275 Lakh Metric Tonnes (LMT) of sugar for domestic consumption, approximately 50 LMT of sugar for diversion to ethanol production, and a closing balance of approximately 60 LMT as of September 30, 2023. The balance of sugar produced by the country's sugar mills would be allowed for export.

Because preliminary estimates of sugarcane production are available at the start of the sugar season (SS) 2022-23, it has been decided to allow the export of 60 LMT of sugar. Sugarcane production in the country will be reviewed on a regular basis, and the number of sugar exports allowed may be reconsidered based on the most recent available estimates.

During the fiscal year 2021-22, India exported 110 LMT of sugar, making it the world's second-largest sugar exporter, earning the country approximately Rs. 40,000 crore in foreign exchange. Farmers' cane arrears were cleared earlier as a result of timely payment and low stock-carrying costs for sugar mills. Despite record sugarcane procurement of more than 1.18 lakh crore rupees, more than 96% of farmer cane dues for SS 2021-22 were already cleared as of 31.10.2022.

In the sugar export policy for SS 2022-23, the government announced sugar mill-specific export quotas for all sugar mills in the country, with an objective system based on average sugar mill production over the last three years and average country sugar production over the last three years. Furthermore, in order to expedite sugar exports and provide flexibility to sugar mills in the execution of the export quota, mills may choose to surrender the quota partially or fully within 60 days of the date of order issuance OR they can swap the export quota with the domestic quota within 60 days.

This system would reduce the burden on the country's logistics system by eliminating the need to transport sugar from distant locations to ports for exports and the movement of sugar across the country for domestic consumption. Furthermore, swapping would ensure the liquidation of all mills' sugar stocks, as mills that are unable to export could swap their export quota with domestic quotas of sugar mills that are able to export more, owing to their proximity to ports.

At the end of the Sugar Season 2022-23, it is expected that the majority of sugar mills will be able to sell their production either domestically or internationally through exports, clearing farmers' cane dues on time. As a result, the policy has created a win-win situation for the country's sugar mills.

The sugar export policy demonstrates the government's focus on ensuring price stability in the sugar sector in the interests of domestic consumers. By limiting sugar exports, domestic prices will remain stable, and no major inflationary trends will emerge in the domestic market. The Indian sugar market has already seen a very minor price increase, which corresponds to an increase in the FRP of sugarcane for farmers.

Another focus area is ethanol production in the country, which is a priority for the country to reduce reliance on fuel imports and transition to green energy. Higher ethanol prices have already prompted distilleries to divert more sugar to ethanol. Another mechanism for ensuring the availability of sufficient sugarcane/sugar/molasses for ethanol production is the sugar export policy. During ESY 2022-23, sugar diversion to ethanol production is expected to be 45-50 LMT.

The government of India has taken care of the interests of approximately 5 crore sugarcane farmer families as well as 5 lakh sugar mill workers, as well as a whole ecosystem of sugar sector including ethanol distilleries, by facilitating the diversion of sugar to ethanol production and the export of surplus sugar as available.