Sugar export curbs and their impact

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Sugar export curbs and their impact

  • The government Tuesday decided to “restrict” the export of sugar, effective from June 1.
  • The curbs, the first such move in four years, have been ordered to maintain “domestic availability and price stability of sugar”.
  • India is the biggest producer of sugar and the second largest exporter after Brazil.

What are the latest curbs?

  • The government has moved export of sugar from the ‘open category’, which requires no government intervention, to ‘restricted’ category.
  • This means that export of sugar is allowed only with specific permission from the Directorate of Sugar, Department of Food and Public Distribution (DFPD), Ministry of Consumer Affairs, Food & Public Distribution.
  • Also, the curbs come into effect from June 1 and will continue till October 31, or until further orders.

Current Status

  • The industry has contracted export orders of 90 lakh tonnes out of which 71 lakh tonnes have been shipped out of the country.
  • From June 1, permission to export would be required for both the pending contracted quantity and any new contracts entered by mills.

How much did India export during the last few seasons?

  • The bumper crops over the last four seasons, exports too boomed.
  • The Centre also extended subsidies to millers to push sales abroad.
  • Before the start of the sugar season (October to September every year), the central government would announce both the quota for export and the subsidy to achieve the target.
  • In 2017-18, the government set a target to export 20 lakh tonnes of sugar and sanctioned a budget of Rs 1,540 crores to handle internal transport, freight, handling and few other operations.
  • For that season, the industry recorded exports of 6.2 lakh tonnes and with a reported expenditure of Rs 440 crores of the subsidy budget.
  • For the next season (2018-19), 50 lakh tonnes export target was set with a subsidy budget of Rs 5,538 crores, of which 38 lakh tonnes of sugar was shipped out using R 4,263 crores of the subsidy.
  • After a bumper crop in 2019-20, export quota was hiked to 60 lakh tonnes with a subsidy budget Rs 6,268 crores. Millers clocked exports of 59.60 lakh tonnes using up Rs 6,225 crores of the subsidy budget.
  • The traction in the international market helped sugar exports touch 70 lakh tonnes in 2020-21, out of which 60 lakh tonnes was done using Rs 3,500 crores of government subsidy and 10 lakh tonnes was exported without any government aid.
  • The export without government subsidy was done under the open general license regime.
  • The current season (2021-22) has seen millers enter into contracts to export 90 lakh tonnes of sugar. Out of this, 71 lakh tonnes of sugar has already left the country.

Reason for bumper exports

  • Brazil produced more ethanol than sugar given the exceptional rise in fuel prices.
  • Drought hitting other big sugar producers like Thailand helped India venture in countries which otherwise were dependent on Brazilian sugar.
  • International sugar prices have continued to be bullish. Exports have helped millers ensure that farmers are paid on time.

Why the curbs, now?

  • Exports, industry insiders say, can continue unabated given the international demand.
  • But for the government, a possible worry is low stocks at the beginning of the next season.
  • This can lead to supply constraints for around three months.
  • The sugar season officially starts in October, but picks up momentum only after December.
  • If there is scarcity of back-up stocks during this period then prices can escalate in the domestic market.
  • Retail prices can see inflation if the October opening stock is anything less than 65-70 lakh tonnes.
  • The present curbs would ensure the government keeps a tab on sugar stock real-time to ensure that there is no shortage at the start of the next season.
  • Retail sugar prices have been almost stagnant year-on -year hovering between Rs 39.50 to Rs 41 per kg.

What is the industry view on the latest restrictions?

  • The first reaction to this curb was a Rs 50 per tonne drop in the ex-mill prices, which was on expected lines.
  • International prices have remained more or less the same.
  • Experts believe India would end up exporting around 100 lakh tonnes of sugar this season even with the curbs.
  • Most millers said the curbs would not affect them much and exports would continue without hassle.

Exams Track

Prelims takeaway

  • Export Quota
  • Sugarcane crop
  • Sugar export and ethanol

Mains Question

Q. The Sugar export from the country has been on the rise with policy support and rising commodity prices in the international market working as a booster in recent sugar exports. Briefly analyze various aspects of sugar export.