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Indian sugar mills seal 200,000 tons exports, eye incentives

MUMBAI/LONDON - Indian mills have contracted to export 200,000 tons of white sugar, taking advantage of a surge in global prices and more deals could be sealed if the government approves incentives, industry officials said.

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Vijay Nazirkar, a farmer, cuts partially destroyed sugarcane to be used as fodder for his cattle at a village in Pune, India. REUTERS/Danish Siddiqui.

MUMBAI/LONDON - Indian mills have contracted to export 200,000 tons of white sugar, taking advantage of a surge in global prices and more deals could be sealed if the government approves incentives, industry officials said.

The latest export deals have coincided with a rally in world raw sugar prices, which hit an eight-month peak of 14.80 cents a pound on Wednesday.

India, the world's second biggest sugar producer, has been pushing mills to sell sugar on the international market and use the proceeds to clear huge debts they owe farmers for sugarcane.

India announced new rules last month making it compulsory for sugar producers to increase exports to at least 4 million tons of locally produced sugar, both raws and whites, in the 2015/16 crushing season to cut stockpiles.

European trade sources said India appeared unlikely to meet the target.

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"If the Indian mills got close to 4 million tons, the domestic price would start to rally sharply," a senior Western analyst said, estimating that Indian mills would export around 2.7 million tons of sugar in 2015/16.

A Mumbai-based dealer said: "Export compulsion and a liquidity crunch are prompting mills to sign new deals. But not all mills are in a hurry."

"Local prices have improved and mills are waiting for overseas prices to rise further."

Shipments from India will put pressure on global sugar prices , and will help India to trim its vast inventory that has depressed local prices.

Mills in Maharashtra and Karnataka have contracted sugar produced in the previous season for exports to countries such as Myanmar, Afghanistan and Sri Lanka at $390 to $410 a ton, free on board, for shipment in October to December.

European traders said some of the Indian sugar exports were likely to be smuggled into China via Myanmar, as exporters took advantage of tight supplies of Thai white sugar in the current inter-crop period.

Uncertainty remained over the structure and timing of raw sugar export subsidies that could be renewed in 2015/16, most likely after elections in Bihar, India's third most populous state, expected to be finished by mid-November.

"Still there is no clarity over exports. Once we have that clarity, more mills could sign export deals," said B.B. Thombre, president of the Western India Sugar Mills Association.

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India could for the first time pay sugarcane farmers in part for produce sold to debt-laden mills. 

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