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India allows 500,000 T unrestricted sugar exports

NEW DELHI, India said on Tuesday it would allow 500,000 tonnes of sugar exports, which was the first unrestricted overseas sales of the sweetener in three years and helped global prices ease.

Shipments from India, the world’s top consumer and the biggest producer behind Brazil, will start in mid-April, government sources said.

At 1538 GMT, New York sugar futures were down 0.8 cent, or 3.1 percent, at 26.64 cents a pound, below last month’s 30-year high of 36.08 cents. London May white sugar was down $16.80 or 2.1 percent at $691 per tonne.

India spent months deliberating on the exports, which amount to a tiny part of its total output of about 25 million tonnes this year but a political watershed after drought forced it to import sugar in 2009/10.

After a meeting of a panel of ministers, Rural Development Minister Vilas Rao Deshmukh told reporters the government had allowed the exports of half a million tonnes of sugar.

Exports of sugar, subsidised by the state and a major source of energy for the country’s half a billion poor, have trickled out in special deals so far, but these sales would be under Open General Licence (OGL), with only a volume limit restriction.

“The news that India has allowed 500,000 tonnes of sugar exports will be viewed as bearish. Prices will drop slightly, at least in the short term,” said Praful Vithalani, who owns Indian brokerage Jagjivan Keshavaji.

In addition to 500,000 tonnes of exports under OGL, India has also allowed overseas shipments of 10,000 tonnes to the European Union and 8,424 tonnes to the United States, government sources said.

These additional exports are an annual feature under World Trade Organisation rules.

The ministerial panel also extended stocks limit on sugar beyond March by six months.

LOWER EXPORT REALISATION

Given the government’s dithering for almost three months amid high domestic food prices, industry sources had said on Monday that only about 200,000 tonnes of exports would be allowed.

Farm Minister Sharad Pawar had permitted 500,000 tonnes of exports in December, but the government later referred the issue to a panel of ministers after a spike in food prices.

The full export permission comes as food prices in India eased from a year high seen in end-December.

Analysts said the delay in allowing OGL exports had deprived Indian sugar mills of higher export realisation due to a drop in global prices.

Global sugar prices rose last month to a 30-year high on supply worries form Australia but then eased on improved output prospects in major producing countries including Brazil, India and Thailand.

“Allowing exports will help domestic prices stabilise and mills to pay cane growers dues,” said Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories, a producers’ body of 250 mills.

Domestic sugar prices have fallen by roughly a third in the past year, making it difficult for mills to pay cane growers. With exports now allowed, the mills are expected to be able to clear arrears of about $886 million.

It was not immediately clear where the bulk of the exports could go, but import demand has been strong from countries in the Middle East.

Japan’s devastating earthquake and tsunami have damaged two sugar refineries, but traders and industry officials said they did not expect any drop in sugar exports to Japan.

Traders had rather expected Japan to import more sugar this year to offset falls in domestic production in Hokkaido, which was hit by excessive rainfall late last year

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