LONDON: An influx of 500,000 tonnes of Pakistani sugar exports will intensify competition with Indian mills and Middle Eastern refineries, adding downward pressure to world prices, trade sources said on Wednesday.

Pakistan will export 500,000 tonnes of sugar with a subsidy of Rs13,000 per tonne, a Finance Ministry official confirmed to Reuters on Wednesday.

A first tranche of 200,000 tonnes can be exported this calendar year while the cut-off date for the total amount will be March 31, 2016.

Traders said the exports, which are expected to be white sugar, could vie with Indian mills for sales to customers in East Africa and Central Asia and compete with Middle Eastern refineries to supply the Afghan market.

Pakistan has set a minimum export price of $450 per tonne for sales into Afghanistan and other Central Asian countries, a trade source said.

Afghanistan imports around 560,000 tonnes of sugar a year, largely from Pakistan, another trade source said.

Pakistan’s government could extend its export programme beyond March if exports are below target, a European trade source said.

India, the world’s number two producer after Brazil, has become a net sugar exporter after years of surpluses, and last week authorised cane production subsidies to incentivise exports and to encourage mills to pay cane arrears to farmers.

“The risk for the Indian exporter is losing the opportunity in hand,” a European trade source said of the Pakistani competition, noting that Indian stocks were some 9 million tonnes, or more than 30 per cent of annual consumption, a high stocks-to-use ratio.

The appetite for Indian mills to compete aggressively in the export market may be diminished, however, by an improving outlook for domestic prices as prolonged dry weather scales back expectations for production in both 2015-16 and 2016-17.

“Why export today at these levels — keep sugar in bags and wait 10 months or so and sell to the local market,” one trade source said.

Traders said that if ICE raw sugar futures surge in coming months then India may focus on exporting raw rather than white sugar with potential markets including Iran, Bangladesh, Indonesia and Malaysia.

“Raw sugar prices need to rise to make exports possible,” said Kamal Jain, managing director of brokerage Kamal Jain Trading Services.

ICE raw sugar is at near 10-month highs as the global market shifts into deficit after years of surpluses.

Published in Dawn, December 10th, 2015