In the age of Globalization, the national & international environment is deciding the prices of every good. Coupled with the Ukraine war & harsh summer, wheat prices in the world were skyrocketing after which India banned the export. The week after the ban, India has further announced to put a cap on sugar export.
In a press brief of the announcement, Food Secretary Sudhanshu Pandey said that “India’s exports have reached a record high in this season and now domestic availability has to be ensured during October – November as consumption increases in the festive season”.
Talking about the proactive measure in the light of the geopolitical situation he said “the decision has been taken given the global situation which may trigger the demand for sugar”.
Indian Sugar in the world
Sugar production in the season 2021-22 is estimated to be around 350 Lakh Metric Tonne (LMT) for the final consumption. India was expecting about 95 LMT of sugar in the current season and 60 LMT of sugar in stock for the October – November festive season. The calculation of sugar export and the domestic requirement was sufficient to manage the demand for sugar. But the changing geopolitical situation and wheat-induced inflation have increased consumer inflation.
India is the world’s largest producer & consumer of sugar. After Brazil, India is the second largest exporter of sugar in the world. But the lower sugar output in Brazil and sugarcane-based ethanol production increased the price and demand of sugar in the world market.
The changing geopolitical situation has induced inflation in the petroleum market and has affected the balance sheet of crude oil importing countries as they largely depend on imports for their domestic energy requirement.
Read More: IMF begs India for wheat
Sugar – the alternative to fossils fuel
The high import bill and the war-induced consumer inflation were costing the normal life of oil-importing countries. In the search for alternative energy, oil-importing countries like Brazil and India are trying to mix excess sugarcane with petrol to make blended ethanol. In a way working on the respective country’s strengths, India and Brazil are diverting a part of the sugar in the production of ethanol.
The production of blended ethanol by mixing sugarcane with petrol will solve the double edge problem of the state. On one hand, it will reduce the import bill of the country and on the other, it will reduce the pollution in the environment. According to reports, ethanol is a clean-burning, particulate-free fuel source. When ethanol is burnt with oxygen, it releases only carbon dioxide and water.
The government has set a target to have 20% ethanol blended petrol by 2025. To complete the target, the Indian vehicle industry has been ordered to calibrate vehicle’s engines to a particular degree of ethanol blending or produce flex-fuel vehicles that can run on pure or blended fossil fuels.
For the Ethanol Blended Petrol (EBP), the government of India has estimated to divert around 35 LMT (Lakh Metric Tonne) in the season 2021-22 and it is expected to grow around 60 LMT of sugar to ethanol. Moreover, from Ethanol Supply Year (ESY) 2013-14 to ESY 2020-21, about 53000 crore revenue has been generated by sugar mills from the sale of ethanol to Oil Marketing Companies (OMCs). And, it is expected that in the ESY 2021-22, more than Rs 18000 crore revenue is expected to be generated by sugar mills from the sale of ethanol to OMCs.
The EBP will solve the three concurrent problems, first it will reduce the import oil bill, second it will reduce environmental costs and third it will increase the financial condition of the sugar farmers. The capping on the export of sugar is an effort by the government to secure its overall interest in the fast changing world.