India sugar output to drop below consumption levels - industry body

By Mayank Bhardwaj and Rajendra Jadhav

NEW DELHI/MUMBAI (Reuters) - India's sugar production in the 2016/17 marketing year is likely to drop below consumption levels for the first time in seven years, although ample carry-forward stocks will help the country meet local demand, an industry body said on Wednesday.

The drop in output will make it nearly impossible for the world's top sugar consumer to export the sweetener in the season starting on Oct. 1, and may force it to import supplies to keep local prices from soaring.

India could produce 23.37 million tonnes sugar in 2016/17, down 7 percent from a year ago as back-to-back droughts ravaged cane crops in the top producing western state of Maharashtra, Tarun Sawhney, head of the Indian Sugar Mills Association (ISMA), told the Kingsman Asia Sugar Conference in New Delhi.

Maharashtra's sugar production in the approaching season is expected to drop by a quarter from a year ago to 6.27 million tonnes, according to ISMA's estimates.

The South Asian country is also likely to start the 2016/17 season with an opening stock of 7.5 million tonnes, down 17.6 percent from a year ago, although still enough - with this year's output - to satisfy local consumption, Sawhney said.

"There will be enough sugar available in the 2016/17 season to meet the domestic demand of about 25.6 million tonnes," he said.

Anticipating lower production, the government has already restricted overseas sale of the sweetener by putting a 20 percent tax on exports.

"In the world market, prices are attractive but exports are not happening due to export duty," said Rahil Shaikh, managing director of ED&F Man India.

India is likely to start the 2017/18 season with opening stocks of 5.2 million tonnes, down 31 percent from the 2016/17 year, estimates ISMA.

"Depleting stock levels could force India to import sugar ahead of the 2017/18 season," said a Mumbai-based dealer with a global trading firm.

India has received normal monsoon rainfall this year and it is allowing farmers to expand the area under sugar cane for the 2017/18 crushing season, Sawhney of ISMA said.

"We could produce a sugar surplus again in 2017/18," he said.

(Reporting by Mayank Bhardwaj and Rajendra Jadhav; Editing by Tom Hogue)