India has produced 350 lakh tonnes of sugar this year. Despite being the largest producer and second largest exporter of sugar, the government has announced a ban on its export. Why here?
India has produced 350 lakh tonnes of sugar this year. Despite being the largest producer and second largest exporter of sugar, the government has announced a ban on its export. Why here?
the story So Far: A fortnight after banning wheat exports, India announced ban on export of sugar To control prices in the domestic market. This is the first time in six years that the Center has imposed a ban on sugar exports.
In an order issued by the Directorate General of Foreign Trade (DGFT) earlier this week, the Center said exports of sugar – raw, refined and white – would be placed under the “restricted” category from June 1 to October 31. The decision, the government said, was taken to maintain domestic availability and contain the rise in prices amid rising global food and oil prices.
What are the restrictions?
India is the largest producer of sugar in the world and the second largest exporter after Brazil. Till the recent order, sugar was freely exportable under the existing export policy. This meant that sugar could be exported in unlimited quantities without any government intervention. On May 24, the Center banned the export of sugar, saying that the export would be allowed with “specific permission” from the Directorate of Sugar and the Department of Food and Public Distribution.
Referring to the DGFT order, the government said in a statement that the export of the season would be limited to 100 lakh tonnes (LMT). The current sugar marketing season began in October last year and will end on September 30, 2022.
Notably, the decision comes at a time when India has recorded record volumes of sugar production and sales in the world markets. “Keeping in view the unprecedented growth in the export of sugar and the need to maintain adequate stocks of sugar in the country and the need to protect the interests of the common citizens of the country by keeping the sugar prices under control, Government of India has decided to regulate it. Sugar export is effective from 01st June 2022. Sugar mills and exporters need to take approval in the form of Export Release Order (ERO) from Directorate of Sugar, Food and Public Distribution Department,” The official notification by the Ministry of Consumer Affairs, Food and Public Distribution read.
Who can export sugar?
The ministry has said in a letter that exporters will have to apply for clearance for dispatch from June 1. of food and public distribution. The validity of the ERO issued is up to the date of the Late Export Order (LEO) under the contract agreement or up to 90 days, whichever is earlier, the statement read.
Non-implementation of an ERO or non-export sugar under ERO within the LEO date may result in penalty under the Essential Commodities (EC) Act 1955 or the Sugar (Control) Order, 1966.
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Sugar export restrictions not applicable to EU, US
The government has said that the export ban on sugar will not apply to the European Union (EU) under the CXL quota and the US under the TRQ (tariff-quota route).
TRQ is a quota for export volumes that enter the US at relatively low tariffs. A higher tariff is applied on additional imports once this quota is reached. India also has a quota arrangement for sugar exports with the European Union. By availing the CXL concession, traders can export sugar at relatively low or zero customs duty.
For the current sugar marketing session, the Center has given permission Exports of 10,475 tonnes of white sugar to the US and 5,841 tonnes to the European Union,
Understanding the relevance of the Centre’s move through production, export and consumption patterns
Explaining the rationale behind the decision to regulate sugar exports, the government said that its decision was taken “in view of the unprecedented growth in sugar exports and the need to protect the interests as well as maintain adequate stocks of sugar in the country”. Common citizens of the country by keeping sugar prices under control.
insights derived from data
Sugar Production in India: In the current sugar marketing year, sugar production in India grew by 14 per cent to over 3.4 million tonnes (as of April). According to the National Federation of Cooperative Sugar Factories Limited (NFCSFL), the country is producing a record 355 lakh tonnes of sugar this season. India produced 311 lakh tonnes in 2020-21, 259 lakh tonnes in 2019-20 and 322 lakh tonnes in 2018-19.
Sugar export from India: Like production, sugar exports have also broken records this year. According to the Centre, sugar exports have increased from 0.47 LMT to 100 LMT in the last five years, an increase of more than 200 times. This season, Indian mills signed contracts to export 9 million tonnes of sugar. While 82 lakh metric tonnes have been dispatched from sugar mills, 78 lakh metric tonnes have already been exported. Last year, India exported 70 LMT of sugar against the target of 60 LMT.
Sugar and Consumption Stocks: According to the Indian Sugar Mills Association (ISMA), India had an opening stock of 8.2 million tonnes in October last year. And the domestic consumption in the current season is estimated to be around 278 lakh tonnes or around 22-25 lakh tonnes in a month.
With the Center limiting sugar exports to 100 lakh tonnes, India is likely to remain with a closed stock of 60-65 lakh tonnes.
government’s argument
“The decision will ensure that the closing stock of sugar at the end of the sugar season (September 30, 2022) remains at 60-65 LMT which is two-three months’ stock required for domestic use. Crushing in the new season starts in the last week of October in Karnataka, October to last week of November in Maharashtra and November in Uttar Pradesh. So normally till November the supply of sugar is from last year’s stock,” the government argued in its decision.
Banning the export of sugar will ensure a closing stock, which can be supplied to the domestic market as per the consumption pattern around that time to prevent price jump due to shortage of supply. The low stock at the start of the next sugar marketing season may become an issue for the government as the months of October to December are mainly devoted to the start of the sugarcane crushing process.
Production, export data along with estimated data for the current marketing season of sugar. , Photo Credit: Department of Food and Public Distribution
Why are there restrictions despite excess stock?
Rising food and fuel prices have driven wholesale price-based inflation to a . pushed on Record high of 15.08 per cent in April. Increase in prices of mineral oils, crude petroleum and natural gas, food articles, non-food items and food products was on account of higher inflation rate last month. Although retail prices of sugar have not been affected much, but this year’s low production in Brazil is indicating a possible shortage of sugar in the coming days.
The Center has said that it has restricted sugar exports, though ID did not impose a complete ban, as it was unwilling to take the risk ahead of the festive season from October. “The global situation reflects the shortage of sugar due to low production especially in Brazil. This may trigger demand globally and in order to protect domestic availability and interests, DGFT has issued an order to maintain domestic availability and price stability of sugar in the country during sugar season 2021-22 (October-September). did,” the government said in its statement.
Talking to the media, Secretary, Food and Public Distribution Department, Sudhanshu Pandey said that it is the priority of the Center to ensure adequate availability of sugar for consumption at reasonable rates. “The demand for sugar increases during the festive season of October and November and hence the Center is committed to ensure availability of sugar for the weak period,” he said.
“… Sugar prices are under control. Wholesale price of sugar in India is in the range of Rs 3,150 to Rs 3,500 per quintal, while retail prices are also under control between Rs 36 and 44 in different parts of the country.
Why are farmers unhappy with the curbs?
farmers Not convinced by the logic of the government That the export restrictions will maintain stable sugar prices in the domestic market. They believe that this decision of the government will not lead to a better deal for their produce.
Ajit Navale, general secretary of the Maharashtra unit of All India Kisan Sabha, told Hindu It is clear from this decision of the government that the burden of inflation will have to be borne by the farmers. “Traders will take this as an excuse to reduce the cost to be paid to farmers” [for sugar], The government had recently announced such decisions on wheat, sugar and onions. The message is clear that the Center will not reduce the price of petrol and diesel to control inflation, but the farmers will have to bear the burden of inflation.
Stating that sugar mills in Maharashtra are struggling to make ends meet, he said sugar mills and farmers would be in trouble due to sugar export restrictions. The government has taken a pro-corporate stance, Mr. Navale claimed.
Uttar Pradesh farmer leader Jitendra Singh Hooda said the Centre’s move has snatched away all opportunities to get more competitive prices for their produce. “This government is closing all opportunities for farmers. We will get access to more markets and better prices due to the international situation,” he said.
“Sugar production is regularly surplus. They should have looked at agriculture sector before imposing restrictions. Monsoon reports were also normal. Quota release system is already in place for sugar mills. So domestic markets are not affected at all. “