India overriding the export ban under AAS
India is contemplating authorising the export of 20,000 tonnes of refined sugar to Kenya, a significant move that would override the current ban on sugar exports. This decision is expected to be facilitated under the Advanced Authorization Scheme (AAS), which allows refineries to import raw sugar and export refined sugar after enhancing its value. This potential shift in policy was revealed by a government official.
Production Fluctuations and Export Controls
India, historically surpassing Brazil in the 2021-22 season, became the world’s largest sugar producer and the second-largest exporter. However, export controls were imposed in October of the previous year, which have been extended beyond October 2023. The reason for this extension is an anticipated decline in sugar production. Despite sufficient domestic availability, the official stated that exportable surplus is expected to be limited this year due to decreased production compared to the last year.
Broader Economic and Environmental Context
The El Nino weather phenomenon has played a significant role in reducing sugar output, affecting major producing states. With El Nino expected to intensify, further production declines are forecasted for the 2024-25 season. In response to the upcoming general election and escalating food inflation, the Indian government has heightened export restrictions on several commodities, including sugar, to stabilize prices. Food inflation has seen a considerable rise, driven primarily by increases in vegetable and pulse prices.
India’s strategic decision to export sugar to Kenya, amidst stringent export controls and fluctuating production, reflects a nuanced approach to balancing domestic needs with international commitments.