India's raw sugar exports could halve this year as mills wait for the government to give the go-ahead for an increased production subsidy, traders said, potentially supporting depressed global prices.

India exported more than 1 million tonnes of raw sugar in 2014 and mills had hoped to export up to 2 million tonnes this year, taking advantage of a sales window before leading exporter Brazil comes to the market.

A delay in the expected incentives could help Brazil and Asia's biggest exporter Thailand grab a greater share of the world market, and support the benchmark New York sugar price that is struggling after losing 12 percent in 2014.

Subsidies assisted Indian raw sugar exports last year and mills have been waiting for news of this year's subsidy since the start of crushing season in October.

Government sources earlier this month said India was considering giving 4,000 rupees a tonne in subsidies for raw sugar exports, up from 3,300 rupees last year.

Prime Minister Narendra Modi's cabinet has so far failed to vet the plan, but could approve the subsidy as early as next week, trade and government sources said.

Most Indian sugar mills believe that the delay means mills will not be able to meet plans to ship out large quantities of raw sugar.

"India has nearly lost an opportunity due to the delay in approving the subsidy," said Kamal Jain, managing director of Kamal Jain Trading Services, a brokerage based in the western city of Pune.

"The window for exports has narrowed. From April shipments will start from Brazil. It is not possible to compete with Brazil. Even competing with Thailand is difficult."

Brazilian sugar starts arriving from April, while Thai sugar has already started trickling in.

India could still export 500,000-600,000 tonnes of raw sugar this season if the subsidy is approved next week, said a Mumbai-based official with a global brokerage.

India has amassed large sugar stockpiles following five years of surplus output, but weak global prices make it uneconomic for mills, which produce only white sugar for domestic use, to export without subsidies.

New Delhi exported 2.1 million tonnes of sugar in 2013/14, including over a million tonnes of raws, trade and industry estimates suggest. Most of the raws went to standalone Asian and African refineries for conversion into whites.Mills will not start raw sugar production until the government gives the subsidy.

Source:- reuters.com