Opinion Express View on ban on sugar exports: Hurting trade in the long run

The extreme precaution with sugar is nowhere comparable to last year’s outright export ban on wheat, which was a response to a failed domestic crop and depleted government stocks. In sugar, there is no such shortage. It’s just that the government doesn’t want to take any chances in the event of the monsoon turning out bad. But even these worries should not extend to sugarcane, which is largely an irrigated crop. It only points to one thing — a government that will do whatever it takes to control food inflation. The coming months leading up to elections may see more proactive “supply-side” interventions. This is already happening in pulses, where the government has made it mandatory for traders, millers and importers to disclose their stocks. It has also not ruled out clamping stock-holding limits “if the markets do not behave”.

The problems with supply-side measures are two-fold. They are mostly invoked when prices rise, not when they fall. It imparts an inherent pro-consumer as opposed to pro-producer bias. Ideally, government policy should privilege neither and simply enable markets to balance supply and demand through the price mechanism.

The second problem is their sheer myopic nature. Building markets take time and effort, unlike undoing that requires just the stroke of a pen. India’s sugar exports were valued at $4.6 billion in 2021-22 (April-March) and $5.8 billion in 2022-23. The industry did well to create a market, both for Indian raw sugar processed by refineries in Indonesia, Malaysia, Bangladesh, Saudi Arabia and Iraq, and for regular plantation whites in Africa, Afghanistan and Sri Lanka. Restoring confidence among these buyers will not be easy. Nor would agri-businesses want to invest when policies are unmade faster than they are made.