Mills seek government incentives to export white sugar

By Mayank Bhardwaj

NEW DELHI (Reuters) - India's money-losing sugar mills are looking for another round of government incentives to export refined products as a supply glut hammers global and local prices, with no end in sight.

Trade minister Nirmala Sitharaman on Friday agreed with the producers body, the Indian Sugar Mills Association (ISMA) that exports had become uneconomical due to record output in top producers Brazil, India and Thailand.

Also, weak crude oil prices mean a lower diversion of cane towards ethanol, bumping up sugar supplies, Sitharaman said replying to a question in the lower house of parliament.

To overcome the problem, the government should give an incentive for exports of up to 2 million tonnes of white sugar as millers are struggling to export raw sugar despite a subsidy, A. Vellayan, ISMA president, told a news conference.

The government last month decided to give mills a subsidy of 4,000 rupees ($64) a tonne for exports of up to 1.4 million tonnes in an effort to reduce stockpiles after five straight years of surplus output. Despite that sales have been slack.

Although India's decision to subsidise raw sugar exports is in line with World Trade Organization rules, incentives for white sugar could attract complaints from other WTO members.

A sharp drop in the Brazilian real has thwarted India's efforts to step up raw sugar exports despite the subsidies to boost shipments.

Mills have so far been able to sign export deals for only about 70,000 tonnes of raw sugar.

"Our raw sugar exports will be viable only if global prices reach 14.4 cents per lb," Vellayan said.

Benchmark New York raw sugar futures steadied on Thursday by settling up 0.01 cent, or 0.1 percent, at 13.15 cents a lb, having dipped on Wednesday to 12.97 cents, the lowest for the spot contract since April.

But global prices risk falling further if the Brazilian real weakens against the dollar.

The outlook for local prices is no better.

Current ex-mill sugar prices are the lowest in three years.

Output in India, the world's biggest producer behind Brazil, is estimated at 26.5 million tonnes in 2014/15 against 24.4 million in the previous year, according to the food ministry.

Local consumption is estimated at about 24.8 million tonnes, and on Oct. 1, when the new season began, mills' carryover stocks from the previous year totalled 7.5 million tonnes.

(Editing by David Evans)