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MUMBAI, Jan.11 (Reuters) – Indian factories delay signing new sugar export contracts as falling world prices and the strengthening rupee widened the gap between local and global rates, told Reuters industry officials.
Falling shipments from the world’s second-largest sugar producer could support world prices, which fell to their lowest level in 5.5 months on Monday, but could also prompt Indian factories to divert more sugar for ethanol production.
“At the current price level, Indian exports are not viable. Factories are getting much higher prices in the local market,” said Ravi Gupta, chairman of the export committee of the All India Sugar Traders Association (AISTA). .
In the local market, factories sold sugar for between Rs 32,000 and Rs 35,000 per tonne, compared to roughly Rs 30,000 offered for overseas shipments, dealers said.
Factories aggressively sold sugar when international prices were around 20 cents a pound, said Rahil Shaikh, managing director of MEIR Commodities India.
Inventories have fallen to comfortable levels and there is no pressure on factories to sign new deals, Shaikh said.
Indian factories have so far signed contracts to export 4 million tonnes of sugar in the 2021/22 marketing year ending September 30, according to traders’ estimates. The country exported a record 7.2 million tonnes of sugar in 2020/21, taking advantage of the government subsidy for overseas sales.
“The surplus has shrunk due to record exports last year and the continued diversion of sugar for ethanol,” said BB Thombare, president of the West Indian Sugar Mills Association.
New Delhi has raised the price at which oil marketing companies will buy ethanol from sugar factories, making biofuel production lucrative.
Most of the sugar export contracts were signed by factories in the western state of Maharashtra and neighboring Karnataka, but the factories of major producers in Uttar Pradesh have resisted due to rising local prices, said Gupta of AISTA.
“Factories are focused on fulfilling signed contracts rather than signing new agreements. If international prices come close to Indian prices, then only factories will come forward,” said a Mumbai-based dealer with a house of world trade, adding that the country could export 6 million tons in the current season.
Reporting by Rajendra Jadhav Editing by Tomasz Janowski
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