India, the world's second-largest sugar producer and a major exporter in recent years, will likely have a smaller role in the sugar export market going forward as its government-led ethanol programme continues to expand, a report said on Monday.

According to the report Asia Biofuel Outlook, produced by research firm BMI, a unit of Fitch Solutions, India's pursuit of increased ethanol blending in gasoline, as a way to cut the oil products' import bill and reduce carbon emissions, will continue to support global sugar prices.

BMI says that there is currently a fast development of additional capacity to produce ethanol in India, where the biofuel is made mainly from sugarcane.

As more ethanol plants start production, more of the country's sugarcane crop will be used to make the fuel, limiting the amount of sugar that will be produced.

According to the US Department of Agriculture (USDA), India's ethanol blending has reached 11.5 per cent, while the country's government target is to reach 20 per cent 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.

BMI noted that Indonesia is also getting back to an ethanol blending programme with a 5% rate initially, and a target to get to 10 per cent by 2030.

The research firm said that the country would need to sharply increase sugarcane planting to reach that target, and it would probably need to import ethanol to do it.

Indonesia is not a regular exporter of sugar, so BMI says the programme would not likely provide additional support to global sugar prices.

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