India may allow sugar mills to export more than previously permitted to help them prevent defaults on contracts, according to people familiar with the matter. 

The government is considering giving the green light to additional sales of as much as 1.2 million tons of sugar for the year ending Sept. 30, said the people, who asked to remain anonymous citing confidential matters. That’s on top of the current quota of 10 million tons.

India, the world’s second-biggest sugar producer, restricted exports in May to safeguard its food supplies. Now, with inventories appearing sufficient to satisfy domestic consumption, growers have asked to increase shipments. Any additional exports this year may pressure global prices. 

The Indian Sugar Mills Association had asked the government to allow shipments of an additional 1 million tons including as much as 700,000 tons of raws, according to Aditya Jhunjhunwala, president of the millers group. Some of the volume has already been contracted, he said.

A spokesperson representing both the trade and food ministries didn’t immediately respond to requests for comment.

Preliminary reports indicate that sugar cane area in top growers Uttar Pradesh and Maharashtra is higher for the crop that will be harvested in the season starting Oct. 1, suggesting supplies are adequate going into next year, Jhunjhunwala said. 

Crop Optimism

Even after exporting an additional 1 million tons this season, the country will have more than 6 million tons in closing stockpiles on Sept. 30, enough to meet local demand before cane crushing starts in October, said Jhunjhunwala.

From the current quota, mills have already exported a record 9.4 million tons this season and the rest is yet to be shipped, Jhunjhunwala said. Still, domestic prices remain low, he said.

“We are hopeful that the government will approve our request in anticipation next year we will have a good crop,” he said.

India was the top sugar exporter after Brazil last year and counts Indonesia, Bangladesh, Malaysia and Dubai among its customers. India rarely shipped more than 7 million tons until last year, when exports hit a record 7.2 million.