India's Decision to Limit the Sugar Export Quota Will Impact the Global Demand-Supply Balance of Sugar

On Saturday, the government ruled in favour of exporting sugar at a practical limit of 6 million tonnes starting November 1, 2022, to October 31, 2023, in order to restrain the uncontrolled sugar export and for ensuring adequate availability. Taking that into account, the Ministry of Commerce, along with the Directorate General of Foreign Trade (DGFT), has also revised the sugar export policy.

The government notified all sugar mills that they had come to the decision to allot 60 LMT of sugar for export during the sugar season 2022-2023, which will come into effect starting November 1, 2022.

As per the circular, all sugar grades, such as raw material and refined sugar, could be exported by a sugar refinery/mill/exporter till the limit notified.

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Adding to that, it was stated that the 60 LMT export quota turned out to be pro-rated out of the sugar mills that had operations in at least one sugar season out of the three considering that the average sugar production executed by the mills in the course of the previous three operational sugar seasons between 2019-20, 2020-21, and 2021-22 respectively.

Additionally, it was stated by the Centre that the production of new sugar, which might begin its initial production during the 2022-2023 season or the mills that were shut down for the last three seasons but might resume amid the current season, will allot around 18.23 percent export quota from the estimated sugar production during the season.

Similarly, it has to be taken into account that sugar mills are able to export the quantity of sugar mentioned either by their selves or via merchant refineries/exporters beginning November 1, 2022, to May 31, 2023.

In the event that a sugar mill is incapable of dispatching around 90 percent of its export quote by May 31, 2023, at that moment out of its allocated quota, 30 percent of the unexported quantity will be taken out of its monthly domestic quota of July/August 2023.

Also, the sugar mills were given the option of either exchanging their export quota partially or fully with the government with the domestic quota of some other sugar mill within 60 days from the order issuance date.

As per the ministry, the transportation costs involving sugar export and moving the product from one state to another would be reduced by the exchange of export quota with domestic quota.

In addition, the mills unwilling to export sugar have the option to give up their ration partly or fully in the duration of 60 days following the issuance of this order.

The sharp reduction in sugar export quota for 2022-2023 in India worsened the global market outlook, which was already suffering from supply hiccups by Brazil, the top shipper.

As per a food ministry notification, the millers were asked to sell 6 million tons in the market overseas by May 31st in the South Asian nation, hinting that it might still allow additional shipments through October 2023. The total quota for 2021-22 was 11.2 million tons.

The timing of the move was unanticipated as the world was already deprived of supplies, with Brazil seeing extreme rainfall and delays in sugar cane crushing. Raw sugar climbed 6 percent in New York compared to late October and could further strengthen after India's announcement that it competes with Brazil as the top producer.

On Monday, it was reported that India was contemplating permitting 6 million tons of exports in the first tranche and an additional 3 million in a second, depending on the production's pace.

The South Asian nation's shipments were unregulated; however, limitations were imposed by the country last year to guarantee adequate local supply following the concerns over output. The curbs have been extended till October next year. But the limits do not apply to the EU and US sales under some quotas.

According to the Indian Sugar Mills Association, this year, India's production is anticipated to be at 35.5 million tons. The country sees Bangladesh, the United Arab Emirates, Indonesia, and Malaysia among its customers.

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According to the managing director of Meir Commodities India Pvt., Rahil Shaikh, sugar mills in India are already subjected to export of around 2.2 million tons.

As per Procurement Resource, the article covers the recent decision by the government to allow only a certain volume of sugar (60 LMT) produced to be exported to other countries.