India will ban sugar exports from the mills starting in October this year.
India has decided to cut down on sugar exports from local mills this year. The reason is that the lack of rain this monsoon has affected the crop yield. The country has implemented this decision for the first time in seven years.
The decision to pull out of sugar exports will cause the global market to suffer a massive hit. This decision will affect the export market in New York and London by increasing benchmark prices. It will cause fear of inflation in the global food market.
An anonymous government source states that the primary goal is to ensure the fulfillment of local sugar requirements. Another aim is to produce ethanol from the surplus sugar cane. As such, the country will not have surplus sugar cane to supplement the export quota.
Indian authorities allowed the local sugar mills to export only 6.1 million tonnes this year. It was a massive decrease from the 11.1 million tonnes sold last year. In 2016, the country imposed a 20% tax on sugar to curb overselling to foreign nations.
The states of Maharashtra and Karnataka contribute more than half of the total sugar exports. However, according to weather department reports, the monsoon rain in these regions has been less than 50% average.
An anonymous official states that the lack of rain this year will affect the crop yield for 2023–24 and even impact the growth of new crops for 2024–25.
Impact of inflation in India
The government allowed sugar mills to sell an extra 200,000 tonnes this August to curb the spike in local sugar prices. Government sources state that food inflation is a concerning issue. Thus, a hike in prices does not allow for exports this year.
India experienced a massive spike in retail inflation of 7.44% in July. Food inflation has reached 11.5%, the highest it has been in three years. India will suffer a 3.3% drop in sugar production, i.e. 31.7 million tonnes for 2023–24.