India's sugar production in the next marketing year could jump by 12% from a year ago as farmers in the second biggest producing western state of Maharashtra expanded the area under sugar cane, a leading trade body said on Thursday.
Higher production could force New Delhi to extend incentives for overseas sales of sugar into the new season, weighing on global prices which are already under pressure due to rising production in Brazil.
India's sugar output could rise to 30.5 million tonnes in the marketing year from Oct. 1, up from 27.2 million tonnes this year, the Indian Sugar Mills Association (ISMA) said in a statement.
Maharashtra is expected to produce 10.13 million tonnes, up from 6.16 million tonnes this year as the cane area has expanded by about 43%, the trade body said.
Years of bumper cane harvests and record sugar production have hammered Indian sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.
To reduce that debt and pare rising inventories, New Delhi approved a subsidy of 10,448 rupees ($138.29) a tonne for 6 million tonnes of exports in the 2019/20 season.
Even in the next marketing year, "India will continue to export about 6 to 7 million tonnes of the surplus sugar," the ISMA said.
In the current marketing year, India's exports are expected to hit a record high of 5.2 million tonnes, the association estimates.
"Considering the higher production, India would give an exports subsidy even next year. Without a subsidy, exports are not possible," said a Mumbai-based dealer with a global trading firm.
India is likely to start the new marketing year with carry forward stocks of 11.5 million tonnes, lower than the 14.5 million tonnes a year ago, the ISMA said.