India is poised to see its sugar consumption soar to an unprecedented 29 million tonnes (mt) this season, reflecting a 4 percent increase from the 28 mt consumed during the 2022-23 season. This surge is attributed to heightened demand driven by election activities and an intense heat wave. However, officials attribute this rise to evolving food habits and increased incomes.

Increased Domestic Sugar Quota

The Food Ministry has set the domestic sales sugar quota for mills at 2.55 mt for June, bringing the total allocation to 22.1 mt since October 2023 for the 2023-24 season. Should the Ministry release an average of 2.4 mt per month for the upcoming quarter (July-September)? The total annual allocation may reach 29.3 mt. The Ministry calculates the sugar sales quota based on historical production and sales data. Mills must sell their allocated quota, with any unsold amounts. Rolling over to the next month's quota, provided valid reasons are given.

Household Consumption Trends

Industry experts point to a significant uptick in sugar demand due to the election campaign. Tea and cold drinks are frequently distributed during rallies and meetings. Additionally, household consumption has spiked due to the ongoing heat wave. This May saw the highest-ever demand and supply in India at a 2.7 mt quota, leaving almost nothing unsold, stated the founder chairman of the All India Sugar Trade Association (AISTA). He explained that the heat wave has increased consumption of lime water among people across different income groups, boosting the demand for ice cream, soft drinks, and stiff drinks. Moreover, high international sugar prices have led to some illicit exports to neighboring countries such as Nepal and Bangladesh.

A senior official noted that earlier consumption estimates were not aligned with allocations, which were lower than actual demand. However, in the last two to three years, the allocations have become more realistic. Sugar mill owners now acknowledge that the allocated quantities match the market demand.

Future Production Targets

The Agriculture Ministry has set an ambitious target of 470 mt of sugarcane production for the 2024-25 crop year (July-June). Despite this, sugar production for the next season may decline to around 31 mt from this year's estimated 32 mt due to a higher commitment towards ethanol production. This season, about 2-2.5 mt of sucrose may be diverted for ethanol, down from 4 mt in the previous season. The government initially fixed 1.7 mt of sugar equivalent for ethanol production, later supplemented by additional quantities. The Ethanol Blending with Petrol (EBP) rate has been raised to 15 percent for this year, up from 12 percent in the 2022-23 ethanol supply year. The government aims to achieve a 20 percent EBP rate by 2024-25, necessitating a greater quantity of sugarcane for ethanol.

The current season marks a significant milestone in India's sugar consumption, driven by election campaigns and an intense heat wave. While evolving food habits and rising incomes contribute to this surge, the government's strategic adjustments in sugar quotas and ethanol production targets play a crucial role in balancing supply and demand. As India progresses towards higher ethanol blending targets, the sugar industry will continue to evolve, offering new avenues for growth and adaptation. Meta Description: Record-breaking sugar consumption in India hits 29 million tonnes. Elections and a scorching heat wave fuel it. Discover insights into domestic quotas, household trends, and future production targets.