According to a report released on Monday by food trader and supply chain services provider Czarnikow Group, India‘s ethanol program will lead the government to end sugar export subsidies and erase exportable sugar volumes from the country, currently the second-largest producer after Brazil.
Czarnikow’s chief analyst Stephen Geldart said in the report that India’s plan to push for a 20% ethanol blend to gasoline as soon as 2023, compared to only around 5% currently, will lead to the production of 6 billion liters of ethanol from sugar cane juice and molasses, “reducing local sugar production by more than 6 million tonnes”.
“By 2025, India will swing from making at most 33 million tonnes of sugar a year to 27 million tonnes. With consumption today at around 25 million tonnes and likely to grow in the future, India will no longer be a major surplus sugar producer and exporter,” the analyst said.
Geldart compares the Indian case with the European sugar policy reform between 2002 and 2008, when cuts to export subsidies and production in the continent led to a strong sugar market rally.
The report says that as gasoline demand increases in India, by 2030, the country will need to produce 13 billion liters of ethanol to meet the E20 blending, diverting more than 10 million tonnes of sugar production.
“As we saw in 2008, the world sugar market will therefore become less well-supplied and more responsive to price,” Geldart said, adding that the market will become vulnerable to any production shock in one of the largest producers.