Udyamee, Ahmedabad:
In a significant policy shift, the Indian government has authorized the export of 1 million metric tons of sugar for the current season ending September 2025. This decision aims to assist sugar mills in managing surplus stocks and stabilizing domestic prices.
This move comes against the backdrop of a projected decline in sugar production. Estimates suggest that output may fall to approximately 27 million tons this season, down from 32 million tons last year, and below the annual domestic consumption of over 29 million tons. Key sugar-producing states such as Maharashtra, Karnataka, and Uttar Pradesh have reported lower cane yields, contributing to this anticipated shortfall.
The export approval is expected to provide relief to sugar mills, including small and medium-sized enterprises (SMEs), by enabling them to offload surplus stocks and support local prices. The government has allocated export quotas to mills based on their three-year average production, allowing them to sell directly or through merchant exporters. This strategy not only aids mills in managing inventories but also ensures timely payments to farmers, benefiting approximately 50 million cane growers.
However, the global market has reacted to India’s export announcement with a decline in sugar prices. On January 20, 2025, sugar prices hit a three-year low, influenced by India’s decision to permit exports despite an anticipated production shortfall.
In the context of SMEs, a CRISIL report from 2019 highlighted that Uttar Pradesh accounts for about 40% of India’s sugar production, with SME mills contributing 35-40% of the state’s output. These enterprises play a crucial role in the industry’s dynamics.
As the season progresses, sugar SMEs must navigate these policy changes and market fluctuations. While the export allowance offers an opportunity to manage surplus stocks, the anticipated production decline and global price volatility present challenges that require strategic planning and adaptability.
