India allows 500,000 tonnes of unrestricted sugar exports

India has allowed 500,000 tonnes of unrestricted sugar exports, a minister said on Tuesday, a move signalling improved output sentiments in the world's second-largest sugar producer that could ease global prices. India spent months deliberating on the exports - a tiny drop in its total output of about 25 million tonnes this year but a political watershed after drought forced it to import in 2009/10.
Exports of sugar, subsidised by the state and a major source of energy for the country's half a billion poor, have trickled out in special deals so far but these sales would be under Open General Licence (OGL), with only a volume limit restriction.
Rural Development Minister Vilas Rao Deshmukh told reporters the government had allowed the exports of half a million tonnes of sugar. It was not immediately clear where the bulk of the exports could go, but import demand has been strong from countries in the Middle East.
Given the government's dithering for almost three months now amid high domestic food prices, speculation was about 200,000 tonnes of sugar exports would be allowed. But a higher volume of Indian exports is now expected to put pressure on domestic or global prices - already slipping from last month's record highs as supply concerns ease.
The export permission comes as food prices in India eased from a year high seen in end-December. Analysts said the delay in allowing OGL exports had deprived Indian sugar mills of higher export realisation as global prices dropped from a 30-year-high last month.
"This move will help stablise domestic prices and help mills to pay cane growers dues," said Vinay Kumar, managing director of the National Federation of Co-operative Sugar Factories, a producers' body of 250 mills. Japan's devastating earthquake and tsunami have damaged two sugar refineries, but traders and industry officials said they did not expect any drop in sugar exports to Japan. Traders had rather expected Japan to import more sugar this year to offset falls in domestic production in Hokkaido, hit by excessive rainfall late last year.