A recent report suggests that India, the world's second-largest sugar producer and a significant exporter, is expected to play a diminished role in the sugar export market due to the ongoing expansion of its government-driven ethanol program. The Asia Biofuel Outlook report, prepared by BMI, a research firm under Fitch Solutions, highlights India's efforts to increase ethanol blending in gasoline as a means to reduce oil import costs and carbon emissions, which in turn, will provide continued support to global sugar prices.
The report also indicates a rapid development of additional ethanol production capacity in India, with sugarcane being the primary raw material for biofuel production.
With the establishment of additional ethanol plants, a larger portion of India's sugarcane harvest will be allocated to fuel production, thereby reducing the quantity of sugar output.
Based on data from the US Department of Agriculture (USDA), India's current ethanol blending stands at 11.5 percent, and the government aims to achieve 20 percent blending by 2025. The report said that although it is "doubtful" that India will be able to achieve that by 2025, the programme will cap exports of feedstocks used in ethanol production.
According to BMI's findings, Indonesia is reintroducing an ethanol blending initiative, starting with a 5% blending rate and aiming to achieve 10% by 2030. To reach this goal, the country would have to significantly expand sugarcane cultivation and might have to import ethanol to meet the demand. However, since Indonesia is not a frequent sugar exporter, BMI believes this program is unlikely to offer extra support to global sugar prices.