MUMBAI, January 10 (Reuters):India's sugar exports are likely to be far lower than a 5 million-tonne targetset by New Delhi as a strengthening rupee and falling global prices makeshipments unattractive despite a government push for overseas sales, industryofficials said.
Lower shipments from theworld's No. 2 sugar producer could support global prices that fell more than 20percent in 2018, but fewer exports could also increase Indian stockpiles aheadof the next marketing season and force the government to provide more supportto an ailing industry.
India is likely to export 2.5million to 3.5 million tonnes of sugar in the 2018/19 marketing year thatstarted on Oct. 1, five dealers and three industry officials told Reuters.
"Mills are not ready tosign new contracts as the difference in local and overseas priceswidened," said a Mumbai-based dealer with a global trading company thatexports the sweetener out of India.
"Going by the currenttrend, it seems India could manage to export 2.5 million tonnes," he said.
Sugar is being sold at around29,200 rupees ($414) per tonne in India, while exporters are getting less than19,000 rupees a tonne, dealers said.
Also, the rupee has risen 5.5percent from a record low of 74.48 against the U.S. dollar in October, dentingmills' margins from overseas sales.
That will make it hard to meetthe 2018/19 target set in September despite government incentives such astransport subsidies and direct cane payments to farmers to encouragecash-strapped mills to ship surplus sugar overseas.
Exports could pick up incoming months, though, as mills are struggling to make cane payments tofarmers, said Rohit Pawar, president of Indian Sugar Mills Association (ISMA).
"I hope we could exportmore than 3.5 million tonnes, and for that, millers have to come forward moreaggressively and the government should provide bridge funding," Pawarsaid.
Indian mills have contractedto export 1.4 million tonnes of sugar since the start of the marketing seasonon Oct.1, shipping around 650,000 tonnes so far, four dealers said.
Earlier banks were notallowing mills in Maharashtra to sell sugar at prices lower than those agreedin loan contracts made using the stockpiles for collateral, said PrakashNaiknavare, managing director of National Federation of Cooperative SugarFactories Ltd, a sugar processor trade group.
But the government has intervenedto let sales go forward. To make cane payments to farmers immediately aftercrushing, mills pledge sugar stocks with banks, which lend based on sugarprices in the local market.
After producing a record 32.5million tonnes in 2017/18, India is likely to produce 31.5 million tonnes to 32million tonnes of the sweetener in 2018/19, more than local demand of around 26million tonnes.
But India has been strugglingto export its surplus because of high production costs.
New Delhi asked mills toexport 2 million tonnes of sugar in 2017/18, but they managed to ship just620,000 tonnes.
"Stocks in India arehuge. Exports need to be done," said Pawar of ISMA.
The country started 2018/19with opening stocks of 10.7 million tonnes, and the inventory at the beginningof the next season will be bigger, Pawar said.
