Drought Impacts India’s Sugar Output, Potential Shortage In 2025

Based on calculations using data from farmers, traders, and the Indian Sugar Mills Association (ISMA), it is projected that India’s sugar production could decline to 26.6 million metric tons in 2024-25, down from 33.1 million tons in 2022-23.

India, the world’s second-largest sugar producer and exporter, is on the verge of facing its first sugar shortage in seven years. This potential shortfall, expected by 2025, is attributed to a severe drought that has significantly impacted sugar output. Industry sources and surveys among farmers indicate growing concerns, suggesting that the country may need to resort to sugar imports to meet the rising demand.

Based on calculations using data from farmers, traders, and the Indian Sugar Mills Association (ISMA), it is projected that India’s sugar production could decline to 26.6 million metric tons in 2024-25, down from 33.1 million tons in 2022-23.

This drop in production could result in a supply gap of 3.4 million tons, as domestic demand is expected to reach 30 million tons by 2025, according to forecasts from traders.

To bridge this gap, India may have to import sugar from countries such as Brazil, Thailand, and Australia. However, this could potentially lead to an increase in global prices and impact consumers.

The primary reason for the decline in production is the drought-like conditions experienced in the western states of Maharashtra and Karnataka, which contribute to over 40% of India’s sugar output. These states have witnessed below-average rainfall for the past two years, negatively affecting cane planting and yield.

More than 200 farmers from 11 cane-producing districts in Maharashtra and Karnataka have expressed their intention to reduce or abandon cane cultivation in the coming year due to water scarcity, low returns, and high input costs.

Some farmers have indicated their plans to switch to crops such as oilseeds, pulses, and cotton, which require less water and labour while offering better prices.

“I have made the decision to stop growing sugarcane from the next year. It is not worth the effort and cost. Instead, I will cultivate soybeans, which are more profitable and less risky,” stated Raju Patil, a farmer from the Sangli district in Maharashtra, as reported by Reuters.

A government official has indicated that the cane area in Maharashtra may decrease by 10% in 2023-24, accompanied by a potential 16% decline in cane yield. In some regions, the decline in cane yield could even reach 40%.

Based on calculations, this may lead to a significant 28% reduction in net sugar production in Maharashtra, resulting in a total of 7.55 million tons in 2023-24.

Similarly, Karnataka is expected to witness a 13% reduction in cane area and a 25% drop in cane yield in the same period. As a consequence, sugar output is projected to decline to 3.7 million tons, according to a survey conducted among farmers.

However, Uttar Pradesh, the largest sugar producer in the country, may experience an increase in sugar production. This is attributed to its superior irrigation facilities and reduced reliance on monsoon rains. Trade houses estimate that Uttar Pradesh could produce 11.5 million tons of sugar in 2023-24, surpassing the 10.5 million tons produced in 2022-23. Furthermore, the production is expected to rise to 12.4 million tons in 2024-25, as less cane is diverted for ethanol production.

Nevertheless, even with the potential increase in Uttar Pradesh’s sugar production, it may not be sufficient to meet the growing domestic demand. The demand is driven by rising incomes and population, growing at an annual rate of 2-3%.

This situation poses a challenge for the government, as it must balance the interests of farmers, millers, and consumers while ensuring the long-term sustainability of the sugar sector. To address this challenge, the government may need to revise its policies on the pricing, procurement, and export of Sugarcane. Additionally, promoting diversification and innovation in the sector, such as ethanol, bio-electricity, and bio-based products, may be necessary to adapt to the changing scenario.