India to Extend Sugar Export Ban and Raise Ethanol Prices Amid Lower Sugarcane Output

India is preparing to extend its sugar export ban for a second consecutive year as the country faces reduced sugarcane output, according to government sources familiar with the matter. The government also plans to raise the price at which oil companies purchase ethanol from sugar mills to enhance biofuel supply. The sources, who requested anonymity due to the private nature of the discussions, said these measures are expected to be announced soon.

India’s absence from the global sugar market could tighten supplies further, pushing up benchmark sugar prices in New York and London. This ban comes at a time when Brazil, the world’s largest sugar producer, is expected to reduce exports due to drought conditions.

"There’s no room for sugar exports given the current crop situation," said one government source. The focus is on fulfilling domestic sugar demand and meeting ethanol blending targets. India aims to increase the ethanol blend in gasoline to 20% by 2025-26, up from the current 13%–14%. Major sugar mills, such as E.I.D. Parry, Balrampur Chini Mills, and others, have expanded their ethanol production capacity in recent years.

The government is considering raising ethanol procurement prices by more than 5% for the new marketing season starting in November. Additionally, a new order will allow sugar mills to produce ethanol directly from cane juice or syrup from November.

India, the world’s second-largest sugar producer after Brazil, imposed a sugar export ban in October 2023, marking the first time in seven years that such restrictions were introduced. Last season, mills were allowed to export only 6.1 million metric tons of sugar, half of the country’s total shipments from 2021-22.

Sugar production for the 2024-25 season is expected to drop to 32 million metric tons, down from 34 million metric tons this year, due to poor rainfall in Maharashtra and Karnataka. The global market may face higher prices without Indian exports, as Brazil’s production is also expected to decline.