India may allow sugar mills to export more than previously permitted to help them prevent contract defaults, according to people familiar with the matter.
The government is considering allowing additional sales of 1 million to 1.2 million tons of sugar for the year ending Sept. 30, said the people, who asked to remain anonymous citing confidential matters. That’s on top of the current quota of 10 million tons.
India, the world’s second-biggest sugar producer, restricted exports in May to safeguard its food supplies. Now, with inventories appearing sufficient to satisfy domestic consumption, growers have asked to ship more volume. Any additional shipments this year would be bearish for global prices.
The Indian Sugar Mills Association had asked the government to allow exports of an additional 1 million tons including as much as 700,000 tons of raws, according to Aditya Jhunjhunwala, president of the millers group. Some of the volume has already been contracted, he said.
A spokesperson representing both the trade and food ministries didn’t immediately respond to requests for comment.
Preliminary reports suggest that the sugar cane area in top growers Uttar Pradesh and Maharashtra is higher for the crop that will be harvested in the season starting Oct. 1, suggesting supplies are adequate going into next year, Jhunjhunwala said.
Even after exporting an additional 1 million tons this season, the country will have more than 6 million tons in closing stockpiles on Sept. 30, enough to meet local demand before cane crushing starts in October, said Jhunjhunwala.
By Mayank Bhardwaj and Rajendra Jadhav
NEW DELHI/MUMBAI (Reuters) - India is considering allowing mills to ship out stocks of raw sugar that have piled up in ports and warehouses, trade and government sources said on Tuesday, weeks after it imposed curbs on overseas sale of the sweetener.
Additional shipments from India, the world's biggest exporter of sugar after Brazil, could weigh on raw sugar futures, which are trading near their lowest in four months.
Last month, India capped this season's exports at 10 million tonnes, a figure they had almost reached, in a bid to prevent a surge in domestic prices as the world's second most populous nation battles high food inflation.
"We are looking into it," said a senior government official, who sought anonymity in line with official rules. "The proposal regarding raw sugar is under consideration."
He was referring to a request from sugar mills for the government to let them ship out unrefined stocks as they grapple with mounting stockpiles of the sweetener following the ceiling on exports.
A government spokesman did not immediately respond to a request for comment.
The stockpiles are estimated to run into about half a million tonnes of raw sugar, including about 200,000 tonnes stuck at ports across the country.
Trade, industry and government officials say that of India's record 10 million tonnes of sugar exports this year, raw sugar accounted for about 4.5 million, while the rest was white, or the refined variety.
Indian mills produce raw sugar only for the overseas refineries that turn 'raws' into whites.
Over the past few years, India has been exporting reasonably large quantities of raw sugar, positioning it as a consistent supplier beside key players Brazil and Thailand.
"Since raw sugar cannot be sold in the domestic market, it makes sense to export it," said Aditya Jhunjhunwala, president of the Indian Sugar Mills Association, a body of producers.
"Otherwise, the quality of our stocks might deteriorate with time."
A Mumbai-based trader said the government had already collected data from mills and exporters regarding raw sugar exports.
The sudden curb on sugar exports, and difficulties of logistics, such as a shortage of trucks and railway wagons, prevented mills from shipping out raws, a New Delhi-based trader with a global trading firm said.
"If the government allows mills to export their inventories, there will be a lot of buyers as Indian sugar is very competitive in the world market," he said.
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