Indian traders have yet to arrange sugar export deals for the new season harvest as mills are not producing raw sugar due to uncertainty over whether the government will offer incentives, industry officials said.

A drop in exports by India, the world's second-biggest producer, would support global sugar prices and let rivals Brazil and Thailand increase shipments of the sweetener.

In the 2013/14 marketing year to Sept. 30, India exported 2.1 million tonnes of sugar, including 1.2 million tonnes of raws. By the end of November 2013, dealers had signed contracts for nearly 500,000 tonnes of raws but this year they've clinched none.

To help mills saddled with large stockpiles, India gave a subsidy of Rs 2,277 to Rs 3,371 ($37 to $54) a tonne for the production of raw sugar for export in 2013/14. After a change of government in May, no decision has yet been made about 2014/15.

"No one is producing raw sugar this year. Unless government announces a subsidy for exports, they won't start production of raw sugar," Sanjeev Babar, managing director of Maharashtra State Co-operative Sugar Factories Federation, told Reuters.

The western state of Maharashtra accounts for most of the raw sugar produced in India.

India's mills traditionally produce white sugar but a global glut has made exports difficult. To bring down inventory, mills produced raw sugar last year, taking advantage of rising refining capacity in Asia and Africa. They are currently producing only white sugar.

"We are not producing raw sugar since exporters are quoting very low prices," said Balasaheb Patil, chairman of Sahyadri co-operative sugar factory, which produced 25,000 tonnes of raw sugar last year. "There is no point in producing raw sugar unless we are sure about prices and the government subsidy."

Kamal Jain, managing director of Pune-based brokerage Kamal Jain Trading Services, said a stronger rupee had added to the pain caused by low global raw sugar prices.

"In the local market, prices will fall further if we fail to export. The government should quickly announce a subsidy to avoid distress sales by mills," Jain said.

Domestic sugar prices hit a nine-month low this month.

In 2014/15 India is set to produce surplus sugar for the fifth year in a row, putting further pressure on mills, which have to pay government-set prices to farmers for cane.

By Nov. 15, mills had produced 560,000 tonnes of sugar compared to 462,000 tonnes in the same period a year ago.

Source:- thehindubusinessline.com