Centre to extend sugar export ban to boost local supplies, ethanol output

India plans to extend a ban on sugar exports for the second straight year as the world's biggest consumer of the sweetener grapples with the prospects of lower cane output, government sources said.

New Delhi also plans to raise the price at which oil companies buy ethanol from sugar mills as part of efforts to boost supplies of the biofuel, said the sources with direct knowledge of the matter. They did not wish to be identified as deliberations were not public.

India's absence from the world market would further squeeze global supplies, propping up benchmark prices in New York and London.

New Delhi plans to prohibit mills from exporting sugar when supplies from Brazil, the world's top producer and supplier of the sweetener, are expected to drop because of a drought in the South American nation.

"In the current crop scenario, there is no space for sugar exports," said one of the government sources.

"After fulfilling the local sugar demand, our next priority is ethanol blending, and we need much more cane to meet the ethanol blending targets."

Seeking to curb carbon emissions, India aims to increase the share of ethanol in gasoline to 20 per cent by 2025-26, from 13 per cent-14 per cent now.

Indian sugar mills such as E.I.D.-Parry, Balrampur Chini Mills, Shree Renuka, Bajaj Hindusthan, and Dwarikesh Sugar have increased their ethanol production capacity in the last few years.

The government is also considering an increase in ethanol procurement price by more than 5 per cent for the new marketing season beginning November, sources said.

Late last month, a government order said India would allow sugar mills to use cane juice or syrup to produce ethanol starting in November.

India's plans to extend a ban on sugar exports and raise domestic ethanol prices have not been previously reported. Both measures are likely to be announced later this month.

A government spokesman did not immediately respond to a request from Reuters for comment.

India, also the world's biggest sugar producer after Brazil, banned mills from exporting the sweetener during the current season that began on Oct. 1, 2023. That was the first sugar export curb time in seven years.

New Delhi allowed mills to export only 6.1 million metric tonnes of sugar during the last season, nearly half of the country's total shipment in 2021-22.

Sugar output during the next 2024-25 season is likely to fall to 32 million metric tonnes from this year's 34 million tonnes due to the adverse impact of last year's patchy rains in Maharashtra and Karnataka states, the sources said.

"The world will need shipments from India in 2025, as Brazil's production is expected to be lower. Without Indian exports, global prices will rise further," said a Mumbai-based dealer with a global trade house.