Challenges Faced by Indian Sugar Mills Despite Export Approval
India, the world’s second-largest sugar producer, has recently been granted permission by the government to export 1 million metric tons of sugar for the 2024–25 marketing season. However, despite this approval, Indian sugar mills are encountering significant challenges in securing export orders. This situation has also led to a surge in domestic sugar prices, creating ripple effects across the industry.
High Premiums Hindering Export Deals
One of the primary issues plaguing Indian sugar mills is the premium pricing demanded by mills over benchmark global rates. While global buyers expect competitive pricing, Indian sugar mills are charging $10 to $25 per ton above the benchmark London prices. This disparity has made international buyers hesitant to place orders with Indian exporters.
Dealers have reported that Indian sugar mills recently signed contracts for around 20,000 tons of white and refined sugar at prices ranging from $490 to $510 per ton. This pricing is significantly higher than global benchmarks, making it difficult for Indian sugar to compete in international markets.
Impact on Export Volumes
India’s sugar export volumes have plummeted to a three-year low. This decline highlights the widening gap between the expectations of international buyers and the pricing strategies of Indian mills. With limited time to fulfill the allocated export quota, sugar mills appear to be holding back in anticipation of further increases in global sugar prices.
Some exporters, particularly in Uttar Pradesh, which has a quota of 274,184 tons, have managed to ship approximately 100,000 tons so far. However, the pace of exports remains sluggish, indicating a cautious approach by mills aiming to maximize their margins.
Domestic Prices Surge by 10%
The domestic sugar market in India has also seen a significant shift. Since the government’s export approval, local sugar prices have risen by approximately 10%. This price increase is attributed to mills prioritizing profitability, focusing on global premiums rather than domestic sales.
For domestic consumers, this spike in prices is a matter of concern, as it directly impacts households and industries dependent on sugar, such as confectionery, beverages, and packaged food.
Export Quota Deadline Adds Pressure
Indian sugar mills must export their allocated quotas by September 2025, but many are reluctant to rush into contracts at current rates. The looming deadline, coupled with their wait-and-watch strategy, poses a significant risk. If global prices fail to increase, mills may struggle to meet their export targets, potentially leading to penalties or financial losses.
