Sugar Mills Seek Export Permission Amid Price Crash

Introduction

India’s sugar industry is grappling with a sharp drop in prices, prompting sugar mills to urge the government to allow exports. Since the 2023–24 season, the Centre has restricted exports to prioritize domestic availability and support the ethanol blending program.This blog examines the impact of export restrictions, the current market scenario, and the industry’s appeal for easing regulations.

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Why Are Sugar Mills Demanding Export Approval?Plunging Domestic Prices

• Overproduction in some regions has caused a supply glut, leading to price crashes in domestic markets.
• Mills are struggling to cover operational costs due to low selling prices and high stockpiles.

Export Restrictions Since 2023

• The government halted sugar exports after three years of record shipments to stabilize domestic supply and control inflation.
• With domestic stocks now surplus, mills argue that continuing restrictions is unnecessary and economically damaging.

Ethanol Program Impact

• A large portion of sugarcane is being diverted to ethanol production under the government’s blending targets.
• Mills claim this diversion reduces raw sugar availability, warranting a balanced export approach to avoid stockpiles and price crashes.

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The Market Impact of Price DeclinesDomestic Trends

• Price Crash: Excess supply has led to significant drops in sugar prices, impacting profit margins.
• Stockpile Issues: Mills face challenges in storage costs and cash flow management due to unsold inventory.

Global Opportunities

• High Global Demand: Countries facing sugar shortages, such as Indonesia and Bangladesh, present export opportunities.
• Competitive Advantage: India could regain its market position if export approvals are granted.

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Government’s Position on Sugar ExportsFocus on Domestic Stability

• The Centre prioritizes domestic availability to prevent price volatility and meet the ethanol blending target of 20% by 2025.
• Policymakers fear export approvals could trigger a price surge and domestic shortages.

Upcoming Policy Review

• The government is expected to review the export policy in January 2025 based on updated production and stock data.
• Industry bodies like ISMA are pushing for controlled export quotas to balance domestic supply and market stability.

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Challenges Faced by Sugar Mills

1. Liquidity Crisis: Falling prices and unsold stocks have caused a cash crunch, affecting farmers’ payments and operations.
2. Storage Issues: Large inventories are putting pressure on storage facilities and logistics costs.
3. Delayed Payments: Mills struggle to clear dues to farmers, exacerbating financial distress in rural areas.

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What’s Next for the Sugar Industry?Industry Demands

• Partial Export Approvals: Mills are seeking permissions for limited exports to ease domestic oversupply and tap global markets.
• Price Stabilization Measures: Calls for subsidies or market interventions to protect mill margins and support farmer payments.
• Policy Reforms: Industry experts suggest a balanced approach that includes both export allowances and domestic reserves.

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Key Takeaways

• Price Crash Concerns: Sugar mills are under financial strain due to falling prices and oversupply.
• Export Approval Push: Mills are urging the government to reopen exports to relieve domestic pressures.
• Policy Outlook: A January 2025 review may decide on controlled exports to support the sugar industry without affecting domestic supply.

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ConclusionIndia’s sugar industry faces a challenging period, balancing domestic supply priorities with export opportunities. As mills push for export permissions to counter price crashes, all eyes are on the government’s policy review next month.Stay tuned for updates on the export quota decision and its market implications.

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