India's sugar output expected to rise to record 29.2 million tonnes - dealers

By Rajendra Jadhav

MUMBAI (Reuters) - India's sugar production is likely to rise to a record 29.2 million tonnes in the 2017/18 season, up nearly 12 percent from a previous estimate as Maharashtra's output could more than double, according to a survey of global and local dealers.

The higher-than-expected output could pressure local prices and force the world's second-biggest sugar producer to remove a tax on exports to encourage overseas sales.

Indian Sugar Mills Association (ISMA) had in January forecast production of 26.1 million tonnes for the marketing season that started on Oct. 1.

"The upward revision in Maharashtra's output number changed the overall number for the country," said a Mumbai-based dealer with a global trading house.

The western state is likely to produce 10.2 million tonnes of sugar, up from a government forecast of 7.3 million tonnes, as cane yield was far better than expected, according to the seven trading house dealers participating in the survey.

India produced 20.3 million tonnes of sugar in the 2016/17 marketing year ended on Sept. 30, including 4.2 million tonnes from Maharashtra.

The government has until now been framing policy in anticipation of production being around consumption levels of 26 million tonnes, said a New Delhi-based sugar dealer.

"The government should realise we will have a significant surplus. Unless government promotes exports, local prices won't recover," the New Delhi dealer said.

Domestic sugar prices have fallen 11 percent in the past four months as mills were aggressively selling the sweetener to make cane payments to farmers.

The government is considering scrapping a 20 percent export duty on sugar exports, the country's food minister said earlier this month.

Mills could not export sugar, however, even after removal of the export tax as prices in overseas market are below local prices, said B.B. Thombre, president of Western India Sugar Mills Association (WISMA).

"Pakistan has been giving a subsidy for exports. India should give the same kind of subsidy to make exports possible," Thombre said.

Pakistan has hiked the amount of sugar eligible for export subsidies to 2 million tonnes from 500,000 tonnes to try to reduce excess domestic supplies.

(Reporting by Rajendra Jadhav; Editing by Tom Hogue)