India will restrict sugar exports for the first time in six years in order to prevent a surge in domestic prices, potentially capping the season's exports at 10 million tons, a government source told Reuters on Tuesday.
In March, Reuters reported that India was planning to curtail sugar exports in order to keep a lid on local prices and to ensure steady supplies in the domestic market.
Lower sugar production in Brazil and high oil prices encourage mills there to produce more sugarcane-based ethanol, which has spurred global price gains.
India originally planned to cap sugar exports at 8 million tonnes, but the government later decided to allow mills to sell more sugar on the world market as production estimates were revised upwards.
The Indian Sugar Mills Association, a producer's body, has revised its output forecast to 35.5 million tons, up from its previous estimate of 31 million tons.
India's sugar mills have signed contracts to export 8.5 million tons of sugar in the current 2021-22 marketing year. Out of the contracted 8.5 million tons, mills have already dispatched around 7.1 million tons of sweetener.
Shares in leading sugar mills such as Balrampur Chini Dalmia Bharat Sugar, Dhampur Sugar Mills Dwarikesh Sugar Industries and Shree Renuka Sugars fell by 8 per cent on Tuesday.
The decision to allow mills to export 10 million tons of sugar would help the country sell a reasonably large amount of sugar on the world market, according to traders.
A Mumbai-based dealer with a global trading firm said that the limit of 10 million tonnes is fairly big, and both mills and the government will be happy with this. He didn't want to be named in line with his policy.
After exporting 10 million tonnes, India's sugar stocks would total 6 million tonnes, enough to cater to the country's festival season demand during the December quarter, the dealer said.