India will invest heavily in the production of ethanol as a fuel. The government wants to mix 20% ethanol with gasoline within five years. This means that less sugar will be produced in the coming years. Subsidies on sugar exports can be reduced or even disappear.
India is number 2 in the world when it comes to sugar production. The country has been struggling with a huge sugar mountain of about 10 million tons for several years. To reduce this surplus and keep the sugar mills financially afloat, the Indian government provides grants strong subsidies to stimulate sugar exports. Partly due to this subsidy, India pumped a record amount of sugar into the world market in the past two seasons.
Lower exports after two record years
In 2019/2020, India exported 6 million tons of sugar and in 2020/2021 that number even increased to 7,1 million tons. The Indian sugar industry expects exports this season, which runs until September 2022, to remain at 5 to 6 million tonnes of sugar. This is partly because competitor Thailand will probably export more sugar. At the same time, the need to export is less great now that more and more sugar cane is intended for the production of ethanol.
The government in India on Wednesday, November 10, approved a proposal to blend 2025% ethanol with gasoline by 20. The government has thus sharpened its ambitions. The previous target was to only achieve a 2030% enthanol blend by 20. Last season, India was at 8,5% and this share is expected to rise to 2021% in the 2022-10 marketing season.
Reduce export subsidies on sugar
According to the government, the accelerated plans will help to reduce export subsidies on sugar. After all, higher ethanol production results in lower sugar production, which reduces the need to stimulate exports. It is doubtful whether the global sugar market will notice this next season. The Indian sugar industry recently predicted that production in 2021-2022 will remain the same at 31 million tons of sugar.
It also remains attractive for India to export sugar for the time being. Current sugar prices are trading at a high level worldwide. The European quotation on the Liffe in London rose again this week to more than €440 per tonne. In short, it remains to be seen whether this season will indeed remain at 5 to 6 million tons of sugar from India. But everything indicates that dumping of cheap subsidized sugar on the world market will be a thing of the past within the next few years.