Explained | Why India, world’s largest producer of sugar, has put the brakes on exports

India has produced over 350 lakh tonnes of sugar this year. Despite being the highest producer and second-largest exporter of sugar, the government has announced restrictions on its export. Here’s why.

The story so far: A fortnight after it banned wheat exports, India announced restrictions on the export of sugar to keep a lid on prices in the domestic market. This is the first time in six years that the Centre has placed a restriction on sugar exports.

In an order issued by the Directorate of General of Foreign Trade (DGFT) earlier this week, the Centre said the export of sugar — raw, refined and white — will be placed under the “restricted” category from June 1 till October 31. The decision, the government said, was taken to maintain domestic availability and prevent a surge in prices amid rising global food and oil prices.

India is the world’s largest producer of sugar and the second-largest exporter after Brazil. Till the recent order, sugar was freely exportable under the existing Export Policy. This meant that unlimited quantities of sugar could be exported without any government intervention. On May 24, the Centre placed restrictions on the export of sugar while stating that exports will be allowed with the “specific permission” of the Directorate of Sugar and the Department of Food and Public Distribution.

Citing the DGFT order, the government said in a statement that the season’s exports will be capped up 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 recorded a record volume of sugar production and sale in world markets. “Taking into consideration unprecedented growth in exports of sugar and the need to maintain sufficient stock of sugar in the country as well as to safeguard interests of the common citizens of the country by keeping prices of sugar under check, Government of India has decided to regulate sugar exports w.e.f. 01 June 2022. Sugar mills and exporters need to take approvals in the form of Export Release Orders (EROs) from the Directorate of Sugar, Department of Food and Public Distribution,” the official notification by the Ministry of Consumer Affairs, Food & Public Distribution read.

In a letter, the Ministry said exporters will have to apply for approval for dispatch from June 1. The ministry said that an Export Release Order or ERO will be issued on receiving an application, following which orders will be placed on the website of the Department of Food and Public Distribution. The validity of an issued ERO will be up to the date of the Let Export Order (LEO) under the contract agreement or 90 days, whichever is earlier, the statement reads.

Non-implementation of an ERO or non-export of sugar under ERO within the LEO date could result in a penalty under the Essential Commodities (EC) Act 1955 or the Sugar (Control) Order, 1966.