India may stay out of sugar exports for years as El Niño and ethanol cut supplies

NEW DELHI: India is likely to have little sugar available for export for at least the next three seasons as the combined impact of El Niño-linked weather risks and rising ethanol demand tightens domestic supplies.

India, once the world’s second-largest sugar exporter, could remain largely absent from global markets as lower cane availability and higher diversion of feedstock toward ethanol reduce exportable surplus. That is expected to keep millions of tonnes of sugar off the international market, squeeze supplies for buyers in Asia, Africa and the Middle East, and support benchmark prices in London and New York.

India exported an average of 6.8 million metric tonnes of sugar a year in the five seasons through 2022-23, accounting for about 10 per cent of global shipments. This season, after sending about 800,000 tonnes abroad, it halted exports until September 30, the end of the current season.

Export curbs likely to continue

Sugar mills require government clearance to export, and New Delhi is expected to continue withholding approvals on a season-by-season basis instead of announcing a long-term ban. Last month a senior minister in Prime Minister Narendra Modi’s government told mills to focus on domestic supply and avoid pressing for exports.

India’s Department of Food, Civil Supplies and Consumer Affairs did not respond to a request for comment on export prospects or the restrictions.

Rahil Shaikh, managing director of Mumbai-based trader MEIR Commodities India, said domestic availability was already under pressure and that weather conditions posed an additional threat

“Supplies are already tight in India, and now El Niño is emerging as a major risk,” said Rahil Shaikh, managing director of MEIR Commodities India, a Mumbai-based trader. “If rains disappoint as forecast, cane planting will suffer and this will keep India out of the sugar export market for at least three years, while Brazil and Thailand could also see their crops affected by El Niño.”

Monsoon concerns hit planting decisions

El Niño conditions are forecast to weaken India’s monsoon this year to its lowest level in 11 years. With June rainfall running more than 40 per cent below average, some farmers have delayed sowing decisions.

Sambhaji Patil, a farmer in Maharashtra’s Sangli district, said he had intended to plant long-duration cane varieties in June but changed course because of concerns over weak rainfall. Instead, he opted to grow soybeans on 2 acres, or 0.8 hectares. Nursery owner Suraj Chavan said demand for cane seedlings had dropped sharply in recent weeks.

Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories, said farmers were likely to move toward crops that need less water, which could reduce cane area and supply in the 2027-28 season. Local authorities in most sugar-producing regions had begun encouraging alternatives including soybeans, pigeon peas and other pulses, while also limiting irrigation water.

Output seen below consumption

India had been expected to produce 30.95 million tonnes of sugar this season, but the forecast has now been cut to 27.9 million tonnes. That would place output below annual consumption of roughly 28.5 million tonnes.

Shaikh said stocks held by mills at the start of the next season on October 1 could fall to around 3.5 million tonnes, which is the lowest level in more than three decades.

Ethanol policy adds pressure

At the same time, India is pursuing higher ethanol blending in petrol and broader use of flex-fuel vehicles in an effort to reduce dependence on costly imported crude oil. Industry estimates suggest ethanol demand could rise to about 30 billion litres by 2039-40 from the current 12 billion to 13 billion litres.

Samir Somaiya, chairman and managing director of Godavari Biorefineries, said future growth would be supported by the spread of flex-fuel transport.

“The trajectory for ethanol demand is incredibly strong,” said Samir Somaiya, chairman and managing director of Godavari Biorefineries. “The next phase of demand evolution will be driven by the commercial rollout of flex-fuel vehicles.”

Maruti Suzuki this month introduced India’s first flex-fuel passenger vehicle, while Hero MotoCorp launched a flex-fuel motorcycle. India removed the production tax on petrol blended with higher ethanol content and introduced fuel containing up to 85 per cent ethanol.

BB Thombare, managing director of Natural Sugar in Maharashtra, said future government policy was likely to favour ethanol output over sugar exports.

Imports could become necessary

India could eventually have to import sugar if El Niño sharply reduces cane acreage and output, with traders warning that the supply situation may worsen further in 2027-28.

India last imported sugar in 2016-17 and 2017-18 after an El Niño-related drought in 2015 reduced cane planting. In 2009 and 2010, heavy Indian purchases helped drive global sugar prices to nearly three times earlier levels.

Mohan Narang, director of New Delhi-based trading house KS Commodities, said both exports and domestic supply could come under severe strain in the years ahead.

“Because of a severe El Niño and rising demand for ethanol, not only would exports from India be wiped out, but imports into India in the coming years could also become necessary,” said Mohan Narang, director of KS Commodities, a trading house in New Delhi.