India, one of the largest producers and consumers of sugar, has recently approved the export of 1 million metric tons (10 lakh metric tons) of sugar. This decision comes at a time when the demand for ethanol is rising and concerns over sugar production are increasing.
In this article, we will discuss the reasons behind this decision, the ethanol blending targets, and its economic implications.
What’s Happening?
The Indian government has decided to allow the export of 1 million metric tons of sugar. This decision was made during a meeting where the country’s sugar production estimates and the current stock levels were reviewed. An official notification will be issued soon, providing detailed information about the export policy, batch allocation, and quantity-related details.
As mentioned in Reuters, according to Food Minister Pralhad Joshi, the government approved this export quota to empower the sugar sector, maintain price stability, and support 50 million sugarcane farmers. Over the past five years (up to 2022-23), India has been the second-largest sugar exporter in the world, exporting an average of 6.8 million metric tons of sugar annually. However, during the 2023-24 marketing year, the export was restricted to prioritise domestic needs.
India’s Move Towards Ethanol Blending Targets
The Indian government has been taking several steps to promote ethanol blending in petrol. In December, the ethanol blending level in petrol reached a record high of 18.2%. Union Minister Nitin Gadkari announced that India will achieve a 20% ethanol blending target in the next two months.
As the world’s second-largest importer of crude oil, India is now taking solid steps to boost ethanol blending. Ethanol, primarily produced from sugarcane and other agricultural products, plays a crucial role in India’s energy policy. Sugar mills are utilising more sugarcane for ethanol production, reducing the country’s dependence on crude oil imports.
India’s Sugar Production and Export
India’s major sugar-producing states — Maharashtra, Karnataka, and Uttar Pradesh — account for over 80% of the country’s total sugar production. Due to a drop in sugarcane yields, the production estimate for the 2024-25 season has been revised downwards. According to Reuters, sugar production could fall to around 27 million metric tons, down from 32 million metric tons last year, and annual consumption will remain below 29 million metric tons.
India, which primarily exports sugar to countries like Indonesia, Bangladesh, and the UAE, was the second-largest sugar exporter in the world until 2022-23. During this period, India’s average export was around 6.8 million metric tons annually. However, in the 2023-24 marketing year, India did not permit sugar exports.
What Does This Mean for Investors?
Leading sugar producers related to ethanol, such as Dhampur Sugar Mills and Shree Renuka Sugars, have played a significant role. Additionally, Praj Industries, a company leading in ethanol production technology, has also shown strong performance in the stock market.
Moreover, the increasing acceptance of ethanol-blended fuel and the production of 100% bio-ethanol-powered vehicles by major manufacturers like Tata Motors, Mahindra & Mahindra, and Hyundai Motors points to growth in this sector.
What’s Next?
The future for India’s sugar and ethanol industry looks promising. Policies, such as promoting green fuels and increasing sugarcane farmers’ incomes, are positive signs in this direction. As per Reuters, Deepak Ballani, the Director-General of the Indian Sugar and Bio-Energy Manufacturers Association (ISMA), believes that “Next year’s production is expected to be quite strong, so the permission for limited exports of 1 million tons is good news for the sugar industry.”
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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