India is facing a significant setback in its sugar production for the 2023/24 year. The Indian Sugar Mills Association (ISMA) has reported a projected 8 per cent decrease in sugar production, with estimates at 33.7 million metric tons, a considerable drop from their earlier forecast of 36.2 million tons in August.

This reduction in sugar production is primarily attributed to lower-than-expected rainfall in crucial sugar-producing states, such as Maharashtra and Karnataka, which threatens to diminish yields. With these weather-related challenges, India may refrain from allocating export quotas, which could have repercussions for global sugar prices, currently trading at multi-year highs.

The impact of this shortfall in sugar production may be exacerbated by the diversion of sugar towards ethanol production, a strategy that several sugar mills have adopted in recent years. However, the extent of this diversion and its impact on net sugar production will only be known after the government announces its annual ethanol procurement price.

In response to the challenging conditions affecting sugar production, the Indian government had previously announced a ban on sugar exports for the 2023/24 season, marking the first time such a measure has been taken in seven years. In the preceding season, India had allowed sugar mills to export only 6.2 million metric tons of sugar, a substantial reduction from the 11.1 million tonnes permitted in the 2021/22 season.

The uncertainty in India's sugar production and exports has also led to the extension of restrictions on sugar exports beyond the month of October, reflecting the ongoing concerns about sugar availability in the global market.