Indian sugar mills have for the first time in three years agreed export agreements without the support of government subsidies as they scramble to pay dues owing to farmers, four industry officials told Reuters.
So far they have contracted 10,000 tonnes of white sugar for exports in the new season that began on Oct. 1, which they face selling at a loss, potentially weighing on international prices.
India is the world's biggest consumer of sugar, but as the second biggest producer, produces more than required. The government uses subsidies to encourage exports and ensure mills make payments to cane farmers.
This year, disagreements among ministries has delayed the announcement of the export subsidy, helping to drive global sugar prices to the highest levels in nearly nine months.
"Mills have started selling sugar to exporters after waiting for the subsidy announcement for months," said Rahil Shaikh, managing director of MEIR Commodities India, noting India has not allocated an export quota for the 2020/21 season. Three other sources that confirmed the export agreements could not be named because of their company policies.
They said the 10,000 tonnes of white sugar had been contracted to trading houses that are exporting the sweetener to Afghanistan for December shipments.
"When we compare overall export volume, 10,000 tonnes is a very small amount, but the deals are significant as it shows the desperation," a Mumbai-based dealer with a global trading firm said.