India Approves Additional Sugar Export Quota to Stabilize Domestic Market Prices
The Central government has granted permission for the export of an additional 5 lakh tonnes of sugar, supplementing the 15 lakh tonnes quota announced in November at the beginning of the crushing season. This strategic move aims to ensure that sugar prices remain stable and avoid a further decline, which was recently observed in domestic markets.
Low Uptake of Initial Export Quota and Price Dynamics
Mills across India showed minimal interest in the export quota offered in November, resulting in only 2 lakh tonnes of sugar being exported. The primary reason for this lackluster response was that domestic sugar prices were higher than international prices. Consequently, more sugar flowed into the domestic markets, causing prices to drop from a range of Rs 44 to Rs 47 per kg to Rs 36 to Rs 37 per kg.
Currently, global market prices for white sugar, which is predominantly produced by Indian mills, remain lower than domestic rates. To address this imbalance and maintain price stability, the government has introduced specific conditions with the approval of the additional export quota.
New Export Targets and Penalty Clauses
The government has mandated that sugar mills signing up for export within 15 days must achieve a target of 70% of their allocated quota by the end of June, with the remaining 30% to be completed by the end of September. A penalty clause has been established to enforce compliance: mills that fail to meet their export quotas will receive reduced allocations in future, proportional to the unutilized quota.
Vijay Autade, a sugar industry expert, commented, "Millers advocated for the additional export quota due to fears that declining domestic prices could be offset through exports. The Centre's total export allocation represents just 7.5% of total sugar production, indicating that the current focus is solely on price stability. The goal is to balance demand and supply, ensuring prices do not fall below Rs 37 or Rs 38 per kg."
Global Market Demand and Production Insights
In global markets, there is a higher demand for raw sugar, whereas Indian mills primarily produce white sugar. This white sugar finds significant demand in Middle Eastern countries, and upcoming festivals such as Ramzan are expected to boost its consumption, according to industry experts.
Maharashtra continues to lead in sugar production, with the crushing season nearing its conclusion. Mills in Maharashtra have produced 89 lakh tonnes of sugar so far, followed by Uttar Pradesh with 66 lakh tonnes and Karnataka with 42 lakh tonnes. Together, these top three states contribute 87.50% of India's overall sugar production, highlighting their pivotal role in the industry.
The government's latest export initiative is designed to prevent a surplus in the domestic market, thereby supporting millers and maintaining a stable pricing environment for consumers.
