India May Allow Sugar Mills to Export More to Prevent Defaults

India may allow sugar mills to export more than previously permitted to help them prevent contract defaults, according to people familiar with the matter. 

The government is considering allowing additional sales of 1 million to 1.2 million tons of sugar for the year ending Sept. 30, said the people, who asked to remain anonymous citing confidential matters. That’s on top of the current quota of 10 million tons.

India, the world’s second-biggest sugar producer, restricted exports in May to safeguard its food supplies. Now, with inventories appearing sufficient to satisfy domestic consumption, growers have asked to ship more volume. Any additional shipments this year would be bearish for global prices. 

The Indian Sugar Mills Association had asked the government to allow exports of an additional 1 million tons including as much as 700,000 tons of raws, according to Aditya Jhunjhunwala, president of the millers group. Some of the volume has already been contracted, he said.

A spokesperson representing both the trade and food ministries didn’t immediately respond to requests for comment.

Preliminary reports suggest that the sugar cane area in top growers Uttar Pradesh and Maharashtra is higher for the crop that will be harvested in the season starting Oct. 1, suggesting supplies are adequate going into next year, Jhunjhunwala said. 

Even after exporting an additional 1 million tons this season, the country will have more than 6 million tons in closing stockpiles on Sept. 30, enough to meet local demand before cane crushing starts in October, said Jhunjhunwala.