As it struggles with shortages at home, India, the world’s top consumer of ethanol made from sugar cane, is thinking about reducing its output. According to persons familiar with the situation, who wanted to remain anonymous since the talks are private, authorities are looking into a proposal to restrict the amount of sugar-cane juice used to produce the biofuel for the current season. The people stated that no final decisions have been taken and that plans are subject to change.
If accepted, the idea would help alleviate local sugar shortages. However, on Wednesday, futures in New York fell as much as 7.9%, the most in ten months. Additionally, it would destroy India’s chances of importing the sweetener.
The world’s second-largest sugar producer, India, had to prolong export limits into October 31 due to poor weather that damaged sugar-cane crops in the country. Indian sugar inventories wouldn’t decline much more if ethanol production was restricted, according to Michael McDougall, managing director of Paragon Global Markets.
According to the people, the proposal may have a limited effect even though it could assist India control food inflation. This is because, according to the people, some ethanol has already been sold at a tender earlier this year and needs to be manufactured.
