By Rajendra Jadhav and Mayank Bhardwaj
MUMBAI/ NEW DELHI (Reuters) - Indian sugar mills signed export deals this week, the first in nearly two months, as an incentive by the top producing state Maharashtra and a rally in global prices of the sweetener made overseas sales attractive, industry sources told Reuters.
A pick up in exports by the world's second-biggest producer could put a lid on world sugar prices, which climbed to more than one-month highs on Thursday amid worries about lower shipments from top supplier Brazil.
Indian sugar export deals, absent earlier this year due to uncompetitive local prices, are trickling in now following a decision by Maharashtra to "exempt cane purchase tax for mills exporting their quota", said Sanjeev Babar, managing director of Maharashtra State Co-operative Sugar Factories Federation.
Just last week, the western Indian state said it would waive a 3 percent tax on cane purchases for mills that export 12 percent of their output in the year ending Sept. 31.
"This decision, along with the rally in global prices, is encouraging mills to export sugar," Babar added.
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According to three dealers, mills have signed contracts this week to export 7,000 tonnes white sugar to Myanmar at around $411 per tonne, free on board (FOB).
"Mills have started approaching us. Earlier we were approaching them, but they were not interested in exports," said a Mumbai-based dealer with a global trading firm.
Offers of Indian sugar need to be at a discount of about $10 a tonne to ICE London front-month futures to be attractive in export markets, dealers said.
But in January, Indian mills were quoting a $30 premium as a threat to domestic output from the first back-to-back drought in three decades kept local prices high. The spread has now turned in favour of the country's exporters as world prices have spiked more than $50 in two weeks.
Indian mills have so far contracted to export 1.15 million tonnes of sugar since the start of season on Oct. 1, of which nearly 1 million tonnes have been dispatched. They have shipped mostly white sugar to Asian countries like China, Myanmar, Sri Lanka and Bangladesh, dealers said.
Indian mills, which have concentrated on exporting whites due to strong demand from Myanmar, are unlikely to produce much raw sugar now as the crushing season is coming to an end.
Already a scarcity of cane has forced more than 100 sugar mills to shut operations ahead of normal schedule.
India's total sugar exports in the current season will be at least 2 million tonnes, said a government official, who did not want to be named as he was not authorised to speak to media.
"We will try to meet our target of 3.2 million tonnes."
(Reporting by Rajendra Jadhav and Mayank Bhardwaj; Editing by Himani Sarkar)