Govt allows 1 mn tonnes of extra sugar exports

The government has allowed another 1 million tonnes of unrestricted white sugar exports, a government source said on Monday, bringing the total approved so far to 3 million tonne, in line with what the industry and markets expected.

The world's second-biggest producer of sugar had already allowed mills to export 2 million tonnes of sugar without restrictions under its Open General Licence (OGL) scheme in the current year that started in October 2011.

"The ministers' panel has decided to allow 1 million tonne," the source said. Trade Minister Anand Sharma confirmed the amount - enough to have a potential impact on the market even though it is small by comparison with leading exporter Brazil's 26.5 million tonnes of raw and refined exports in 2011.

A panel of ministers also allowed unrestricted exports of wheat flour under the OGL mechanism for the year starting April 1, 2012, removing a limit of 650,000 tonne set for the current fiscal.

Local sugar mills expect the country to produce 26 million tonnes of the sweetener in 2011-12 and say annual domestic sugar consumption stands at around 22 million tonne, allowing room for exports.

"The decision to allow extra sugar exports has already been discounted as the market knew well in advance the likely outcome of the decision," said Prasoon Mathur, a senior analyst with Religare Commodities.

A government source and traders had told Reuters India could agree to another 1 million tonnes of sugar exports at the Monday meeting, just ahead of top producer Brazil's entry into the market next month when global prices could tumble.

Traders said the extra exports could put some downward pressure on global prices, which are already expected to fall this week on rising supplies from Thailand, the world's second-largest exporter after Brazil.

May raw sugar futures on London's ICE were down 0.47% to 25.51 cents a lb by 1444 GMT.

Domestic prices may rise on Tuesday as mills find an alternative outlet for their product. Sugar futures rose for a second straight session on Monday, partly on hopes for exports.

"The decision could help improve local prices, say by about 1%," said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association.