Indian mills to sell another million tonnes sugar - group

By Maha El Dahan

DUBAI (Reuters) - Indian sugar mills have already contracted to sell one million tonnes of sugar in the 2015-16 season and expect to sign deals for another million as exports head for China, the head of an industry group said on Monday.

"One million tonnes have been contracted and another one million tonnes will be contracted," Indian Sugar Mills Association President Tarun Sawhney told a conference in Dubai.

Of the million tonnes already contracted, about 700,000 tonnes have left the country. Sawhney said many of the current and future contracts were with Myanmar, where the sugar is expected to be smuggled into top importer China.

"It will go to China," he said. "The contracts are all through Myanmar and from there it's just being taken up country."

The smuggling of agricultural products along China's borders with Vietnam and Myanmar has long been a problem. China's sugar industry has urged the government to tackle a resurgence in smuggling there, with huge volumes of cheap sugar estimated to have illegally entered in recent months.

Sawhney said domestic Indian sugar production would reach 26 million tonnes in the 2015-16 season, which runs from October to September, and would probably see the same figure for 2016-17.

India produced 28.3 million tonnes in the 2014-15 season.

"It is too early to tell but most likely there will no decrease and no increase," he said. "Uttar Pradesh will most likely compensate for the drop in Maharashtra and Karnataka."

The first back-to-back drought in nearly three decades has hit cane plantations in India's key producing states Maharashtra, Karnataka and Uttar Pradesh.

"Maharashtra and Karnataka will certainly have lower planting and lower availability of sugar cane next year," Sawhney said.

Sawhney said India would meet its target of blending 5 percent ethanol in all gasoline sold in 2015-16 for the first time, and even surpass it.

"We can cross 5 percent ethanol blending," he said.

Oil companies have never met the current 5 percent blending target as ethanol derived from molasses, the thick syrup produced by boiling down sugarcane juice in sugar refining, costs more than gasoline, without including taxes.

(Reporting by Maha El Dahan; additional reporting by Rania El Gamal, editing by David Brough and David Clarke)