India's sugar industry is navigating a challenging landscape in the 2024-25 marketing year, marked by reduced production, limited export prospects, and a governmental emphasis on domestic stability.
Production Decline Due to Adverse Weather
Unfavorable weather conditions, including droughts and excessive rainfall, have led to a significant drop in sugar production. Key sugar-producing states such as Maharashtra, Karnataka, and Uttar Pradesh have reported notably lower cane yields. Estimates suggest that sugar production could fall below consumption levels for the first time in eight years, with projections around 27 million metric tons against an annual consumption exceeding 29 million tons.
Government's Focus on Domestic Supply and Ethanol Production
In response to the production shortfall, the Indian government has extended its sugar export ban for the second consecutive year to ensure sufficient domestic supplies and to bolster ethanol production. This strategy aligns with India's goal to achieve a 20% ethanol blend in gasoline by 2025-26, up from the current 13%-14%. The government plans to increase ethanol procurement prices to encourage biofuel production, reflecting a clear priority on domestic needs over export opportunities.
Export Limitations Amid Rising Domestic Demand
Despite the export restrictions, Indian sugar mills have signed contracts to export 600,000 metric tons of sugar for the 2024-25 marketing year. However, rising local prices and increasing domestic demand, particularly during the summer months, have made mills hesitant to commit to further exports. This cautious approach is expected to support global sugar prices, as reduced Indian exports tighten global supply.
Sufficient Opening Stocks and Price Monitoring
India is projected to commence the 2025-26 sugar season in October with ample opening stocks, despite the lower production and limited exports. Industry leaders assert that the current supply situation remains robust, with opening stocks estimated at 5.4 million tons, sufficient to meet domestic demand in the initial months of the new season. The government continues to closely monitor sugar prices and is prepared to intervene if necessary to maintain price stability.
