(Updates to add detail, background)
By Rajendra Jadhav
NEW DELHI, March 23 (Reuters) - India is likely to export 4.5 million tonnes of sugar in 2019/20, down almost a fifth from an earlier estimate, as a drop in global prices due to the coronavirus outbreak makes overseas sales unprofitable for mills, a senior industry official said.
Lower exports from the world’s biggest sugar producer could support global prices that have fallen nearly a third from a Feb. 12 peak and help rivals such as Brazil to increase exports.
“There is no export parity after the recent fall in global prices. At this price level new deals won’t take place,” Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd told Reuters.
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, the government has approved a subsidy of 10,448 rupees ($137.5) a tonne for exports of 6 million tonnes in the 2019/20 season ending on Sept. 30.
Indian sugar mills have already dispatched 2.8 million tonnes out of 3.7 million tonnes of contracts signed for the exports, Naiknavare said.
Mills and traders may struggle to export remaining contracted quantity and “some exports contracts may get cancelled” due to the sharp drop in the prices, he said.
Exports from India was expected to pick up from March after New Delhi reallocated unused sugar exports quotas in February.
Before reallocation could accelerate exports, global prices tanked and dampened exports prospects, said B. B. Thombare, president of the Western India Sugar Mills Association (WISMA).
Demand for the sweetener from ice cream and beverage makers typically rises during the summer season, but this year it has been falling as people are avoiding eating cold drinks and ice creams due to coronavirus concerns, Thombare said.
India has reported 415 cases of the coronavirus and seven deaths but health experts have warned that a big jump could be imminent.
In response, authorities have imposed travel restrictions and banned big gatherings for weddings or religious events, cutting sugar demand.
“Sugar industry is in crisis. Exports are not happening. Local demand is falling. We can’t pay cane farmers promised price,” said Thombare. (Reporting by Rajendra Jadhav; Editing by Emelia Sithole-Matarise and Louise Heavens)