India is set to allow exports of 1 million metric tonnes of sugar during the current season, government and industry sources said, to help mills export surplus stocks from the world’s second biggest producer of the sweetener and help prop up local prices.

The permission to let mills sell 1m tonnes of sugar on the world market could put further downward pressure on global sugar prices SBc1, LSUc1.

The government is expected to soon issue an official order allowing exports of 1m tonnes of sugar, said the sources who did not wish to be named as they were not authorised to speak to the media.

The decision to allow exports, which had been speculated for the past few weeks, comes as a surprise to a section of traders, as this year’s production is expected to fall below consumption for the first time in eight years.

Maharashtra, Karnataka, and Uttar Pradesh account for more than 80 per cent of the country’s total sugar production, with lower cane yields in these states prompting trade houses to reduce their output estimates for the current 2024-25 season.

The production could fall to around 27m tonnes from last year’s 32m tonnes and below annual consumption of more than 29m tonnes, according to leading trade houses.

India, whose sugar export markets include Indonesia, Bangladesh and the United Arab Emirates, was the world’s No. 2 exporter during the five years to 2022-23, with volumes averaging 6.8m tonnes annually.

India did not allow exports in the 2023-24 marketing year.

The Indian Sugar and Bio-energy Manufacturers Association, a producers’ body, said the permission to export 1m tonnes of sugar would help sugar mills reeling from low local prices.

Sugar prices in India are hovering around their lowest level in 1-1/2 years.

“Next year’s production is likely to be quite strong, so allowing limited exports of 1m tonnes is good news for the sugar industry,” said Deepak Ballani, director general of the Indian Sugar and Bio-energy Manufacturers Association.