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Russia a step too far for India sugar sales - trader

By Mayank Bhardwaj
NEW DELHI, Oct 5 (Reuters) - Indian sugar mills, flush with supplies, are under pressure to export but high freight charges make it unviable to tap potential new markets like Russia and Black Sea states, a trade official said on Friday.

Brazil is the main origin for sugar sales to Russia, the world's leading raw sugar importer, but in recent weeks the possibility of Indian sales has been explored, traders said.

London-based traders have also reported freight enquiries to move Indian bulk raw sugar to the Black Sea region, but there has been no confirmation of any actual business.

Chandra Shekhar Nopany, who heads three sugar mills run by industry conglomerate Birla Group, said exports to such far-flung locations were unlikely.

"We can export sugar to the Middle East or Southeast Asia but not to far off places like Russia," Nopany, a former president of the Indian Sugar Mills Association, said.

"We cannot go beyond the Persian Gulf," he said, adding prohibitive freight costs were the main reason.

Traders say Indian sugar would have to pass through the Suez Canal on its way to Russia, which involves extra passage costs. Lower production costs mean Brazilian sugar is $20 per tonne cheaper than Indian sweetner before it is shipped.

India entered the raw sugar market in early 2007 contracting to supply 500,000 tonnes to a refinery in the Middle East, but since then has not made big sales with global prices low.

The country is expected to overtake Brazil as the world's top sugar producer this season and a lack of storage may force India to sell at lower prices later this year, the International Sugar Organisation said last month.

The London-based organisation forecast in a monthly report Indian sugar output in the season that began in October at an all-time high of 33.15 million tonnes, up eight percent on year.

"It will be our compulsion to export 4 million tonnes in the new season, but we cannot do that by exporting to places where we do not have a freight advantage," said Nopany.

India exported 1.8 million tonnes, mostly white sugar, in the season that ended in September 2007.

Nopany said raws would form the bulk of India's sugar exports in the year to September with new refineries set up in the Middle East and some neighbouring countries.

"Producing sugar is a losing proposition now and the only way out is to export as much as possible," Nopany said, adding that the group's companies have recently exported 25,000-30,000 tonnes of white sugar to Bangladesh and Nepal.

Birla Group, one of the country's top conglomerates, has three sugar firms -- Oudh Sugar Mills Ltd, Upper Ganges and Industries Ltd , and unlisted Gobind Sugar Mills Ltd.