sugar export: India’s 10mnt ceiling on sugar unlikely to impact exports: India Ratings

The recent restriction on sugar exports is unlikely to materially impact the sector dynamics, as the ceiling of 10 million tonnes (mnt) is sufficient to tap the export potential and maintain domestic balance, says India Ratings and Research (Ind-Ra).
The government on 24 May 2022 imposed a cap of 10mnt on the export of sugar for the sugar season 2022 (SS22; October-September) while requiring exporters to take approvals in the form of export release orders from the Department of Food and Public Distribution from June 2022. The move is to ensure sufficient domestic availability and price stability.
In a statement, Ind-Ra says India has emerged as a leading exporter of sugar in the past few years, accounting for over 10% of the global trade of 55-65mnt, aided initially by the government’s export subsidy programme since 2018 and then by the lower exports from Thailand and weather issues in Brazil, driving international prices to multi-year highs.

“India exported a record 7.1mnt in the first seven months of SS22 (October-September), up 64%yoy, exceeding expectations, despite the withdrawal of export subsidy in 2021 due to strong market prices. Ind-Ra expects the total exports for SS22 to rise to 9-10mnt, surpassing the previous high of 7.2mnt exported in SS21 (SS20: 6mnt), as the lower production in Brazil (down 40%yoy in first 1.5months ended mid-May 2022) due to adverse weather conditions and delayed harvesting creates higher opportunities for India,” says a statement.
Brazil is the largest exporter of sugar, constituting 35%-45% of the global trade, and a fall in its exports in the current season could result in India’s share rising to around 15%. However, Ind-Ra believes exports were anyway unlikely to exceed 10mnt, given the rebound in production in Thailand after two consecutive seasons of decline. As a result, the restriction is unlikely to materially affect the sector, although any issues in the mill-wise approval process could act as a dampener.
Ind-Ra says despite producing high-quality sugar, the competitiveness of Indian exports is affected by the country’s high cane costs relative to other major producers including Brazil, Thailand and Australia, rendering exports unviable without subsidy until about a year back.
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