The government will pay exporters up to Rs 1,400 a tonne to help meet the transportation costs to the ports, media reports said citing agriculture minister Sharad Pawar.
The subsidy has made Indian sugar very competitive and we should comfortably export 2 million tonne this year, Narendra Murkumbi, managing director, Shree Renuka Sugars Ltd, said in a interview. Exports could easily reach 3 million tonne next year, he said.
An increase in shipments from India may compound a global surplus and lower the chances of a recovery in sugar prices that have slumped 29% in the past year.
World output is headed for the first surplus in four years after price gains in 2004 and 2005 led growers in Brazil and Asia to boost plantings.
Indian sugar is now available for exports at $315 a metric tonne free on board basis, compared with $320 a tonne for Brazilian sugar, according to Murkumbi.
The countrys proximity to markets in Africa and Asia cuts freight costs and voyage time, he said.
There will be a rush among Indian exporters to sign as many contracts as possible, said Amol Tilak an analyst at Kotak Commodity Services Ltd in Mumbai. I wont be surprised if exports rise to 2 million by September, he added.
Lower prices have reduced profits on exports from India and companies have shipped 350,000 tonne since the government ended a six-month ban in January, said Murkumbi. The Indian Sugar Mills Association in January had forecast exports of 1 million tonne.
Sugar prices in India have fallen by more than a fifth the past year amid forecasts of a bumper crop. Output may reach 24.9 million tonne this year and grow 10% in the 2007-08 cycle, depending on the rains, Czarnikow Sugar Ltd said in a report.
The bumper crop has increased pressure on the government to provide mills incentives to export and support domestic prices.