MUMBAI: India plans to restrict sugar exports for the first time in six years to prevent a surge in domestic prices and could cap this season’s exports at 8 million tonnes, government and industry sources told Reuters.
An announcement could come early next month, they said. Shares in sugar manufacturers slid on the news, with Dhampur Sugar Mills and Balrampur Chini each tumbling 5% and Dwarikesh Sugar losing 6%.”Sugar output is going to be a record high, but stocks are depleting fast because of exports. Uncontrolled exports could create scarcity and local prices could spike during festive season,” said a senior government official with knowledge of the matter who asked not to be identified.
Two of three sources said the government has planned a cap of 8 million while one official said the government is also exploring the option of a levy on exports to discourage overseas sales.
India’s Ministry of Commerce and Industry did not immediately respond to a request for comment.
A cap of 8 million tonnes for the marketing year to end-September could result in a de facto ban for exports from May as dealers say mills have already contracted to export 7 million tonnes so far. Based on March deals for around 1 million tonnes of exports, they estimate mills could sign contracts for another 1 million tonnes in April after global white sugar prices jumped to a 5-year high on Thursday.
Lower output in top producer Brazil and firm oil prices which encourage mills to produce more sugarcane-based ethanol have spurred global price gains. Export curbs by India, the world’s No. 2 sugar exporter, would likely further lift prices.
Earlier projections estimated domestic sugar stocks as of Oct. 1 could fall to a five-year low of 6.8 million tonnes due to record exports, but those forecasts now look optimistic after the rise in global sugar prices.
“New Delhi is keen to start the new season with opening stock of 6 to 7 million tonnes, which is enough to fulfil December quarter demand,” an industry official said.
Demand usually jumps during the December quarter due to weddings and festivals such as Diwali and Dussehra.