Centre reallocates unused sugar export quotas to boost shipments

India has reallocated unused sugar export quotas of more than 600,000 tonnes among mills after some producers failed to ship because of a drop in output, a government circular said on Monday.

The redistribution of quotas could lift exports from the world's biggest sugar producer in coming months and may weigh on global prices that hit a two-and-a-half-year high earlier this month. Export quotas of 611,797 tonnes have been redistributed after reviewing export performance of the mills, the Ministry of Consumer Affairs, Food and Public Distribution said in a circular.

Years of bumper cane harvests and record sugar production have hammered Indian sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To reduce that debt and pare rising inventories, New Delhi has approved a subsidy of Rs 10,448 ($145) a tonne for exports of 6 million tonnes in the 2019/20 season.

But many sugar mills, especially from the western state of Maharashtra, failed to export sugar due to a drop in production as cane plantations were hit by drought and floods. “The government has done reallocation at the right time. This will give momentum to exports in the coming months,” said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories.

India could export more than 5 million tonnes of sugar in the 2019/20 marketing year ending on Sept. 30, Naiknavare said.

India had set export target of 5 million tonnes for 2018/19, but mills managed to export only 3.8 million tonnes despite incentives provided by New Delhi.

New Delhi has been consistently reviving the export performance of mills and could reallocate export quotas of 300,000 to 400,000 tonnes in April, said a government official, who declined to be named.

The rally in global prices has made exports attractive for mills that have a surplus, said a Mumbai-based dealer with a global trading firm.

Indian mills have contracted to export 3.2 million tonnes of sugar so far in the 2019/20 season and nearly 1.6 million tonnes have already been shipped, the Indian Sugar Mills Association (ISMA) said last week.

The country's sugar output in 2019/20 could fall 21.6 per cent from a year ago to 26 million tonnes, the lowest level in three years, ISMA said.