"There has been a shortfall in sugar cane production in Brazil and this has led to prices shooting up in the domestic market," said S L Jain, director general, Indian Sugar Mills Association. Brazil's sugar output for 1999-2000 estimated at 192.8 lakh tonnes is expected to go down further to 155.9 lakh tonnes in the next season.

Both alcohol and sugar prices are so high in Brazil that the Brazilian industry would prefer to offload their limited sugar stock in the domestic market rather than export it.

The weather has also been unkind to Australia and Thailand and production in both the countries has suffered.

In the EU, despite good weather, exports are expected to go down because of WTO obligations. Under the WTO agreement, the EU countries have to gradually reduce acreage for ``B-quota exports'' which is subsidised by the government."The EU countries had to reduce acreage last year and they will have to reduce it further this year. This will definitely cut down their exports," Mr Jain said.

Export prospects for Indian producers have brightened also because of rising global prices. Prices which were as low as $ 150 per tonne last year currently stands at $ 272 per tonne. "Although the Indian industry is still not in a position to earn profits, the current prices are enough to get us started."

According to trade estimates, sugar prices were likely to go up to $300 per tonne in a few months. Once prices reach the $300 level, imports will become profitable for Indian exporters. But the industry is not prepared to sit idle till that time. After the recent orders passed by the government allowing export of 10 lakh tonne of sugar, the Indian industry has already exported 2 lakh tonne.

As our ports don't have the capacity to export large quantities in one go, we will not be able to export the entire 10 lakh tonne at once, Mr Jain said. Moreover, it is not easy to find spot buyers for large amounts. "As we want to get rid of our excessive stock as quickly as possible, we have decided to continue our exports slowly and steadily."

And what are the markets that hold potential for Indian exporters? Pakistan, at the moment, appears to be the clear winner. With Pakistan amending its Import-Export Control Act to allow sugar imports from India, producers are hopeful that it would eventually turn out to be the biggest market for Indian sugar.

Last week, Pakistan had issued a tender for 1,00,000 tonne of sugar and had invited bids from ``all countries''. India is hopeful of being a front-runner in the race as it enjoys a freight advantage over other countries.

Cost of shipping one tonne of sugar from Thailand, India's closest competitor, is $ 29 while shipping costs from India stands at $ 18 per tonne. Additionally, shipment time from India is only two days while it takes eight-nine days for shipping sugar from Thailand.

As Pakistan is facing a severe sugar shortage, the industry feels that it will subsequently issue tenders for more imports. Pakistan has a shortage of five lakh tonnes of sugar in the current year. The shortage is expected to go up to 10 lakh tonnes by the end of the next sugar year. "If things go well, we may be able to export the entire 10 lakh tonnes of sugar to Pakistan."

But it is not just the Pakistani market that the Indian industry is looking at. Other countries like Colombo, Russia and Middle East countries including Yemen hold a lot of export potential. India is now in a position to call the shots in the export market for sugar, Mr Jain said. "To exploit the situation properly we have to play our cards well".