India’s move to extend the ban on sugar exports signals a strategic shift towards bolstering domestic supply chains and reinforcing its commitment to ethanol production. This decision comes at a critical juncture for global markets, where reduced output from Brazil due to drought has already tightened supplies. India’s role as the world’s second-largest sugar producer positions it as a key player in the global sugar trade, and its absence from export markets is expected to ripple through international prices, particularly in major hubs like New York and London.

At the heart of this policy is India’s ambition to reduce carbon emissions through enhanced ethanol blending in gasoline. The target of increasing the ethanol mix to 20 per cent by 2025-26 from the current 13-14 per cent reflects a broader push to transition towards cleaner energy sources. Ethanol, derived from sugarcane, plays a dual role in this strategy: it reduces reliance on fossil fuels and provides a stable demand for the sugarcane crop, especially when global sugar prices fluctuate. This policy, while environmentally commendable, is not without its challenges. Sugarcane is a water-intensive crop, and India’s recent weather patterns ~ marked by erratic monsoons ~ have already impacted production. States like Maharashtra and Karnataka, which are key sugar producers, are facing lower yields due to uneven rainfall.

This decline in production is expected to continue into the next season, with output likely to fall further. In this context, diverting a larger share of sugarcane towards ethanol production could strain domestic sugar supplies, potentially leading to price hikes within India. The government’s decision to raise ethanol procurement prices by over 5 per cent starting in November further underscores the prioritisation of ethanol over sugar exports. This move is likely to incentivize mills to focus more on ethanol production, which aligns with national goals but could exacerbate the already tight sugar supply situation domestically. However, this also provides an opportunity for Indian mills to capitalise on the growing demand for ethanol, both within and potentially outside the country, as global markets increasingly look for alternative fuels.

From a global perspective, India’s extended absence from the sugar export market could have significant consequences. The world is already grappling with supply shortages, and with Brazil’s production expected to drop, the reliance on Indian sugar exports will be more pronounced. Without India’s contribution, global sugar prices are poised to climb even higher, affecting consumers and businesses worldwide. India’s decision to extend the sugar export ban is a calculated move aimed at achieving long-term sustainability goals through increased ethanol production. While this policy supports India’s energy transition and environmental objectives, it also places pressure on both domestic and global sugar markets. The challenge for India will be to strike a balance between meeting its ethanol targets and ensuring sufficient sugar supplies for both domestic consumption and global trade. How the country navigates this delicate balance in the coming years will be crucial for its agricultural and energy sectors.