India sugar surplus seen down 2 mln T on ethanol

By Abhishek Shanker and Rajendra Jadhav

MUMBAI (Reuters) - India's sugar surplus is likely to drop by 2 million tonnes in 2007/08 following a government decision to allow ethanol production directly from cane juice, a senior industry official said on Wednesday.

The cabinet approved late on Tuesday the ethanol proposal to help sugar mills struggling with a supply glut, as the country is forecast to beat Brazil as the world's top sugar producer this year.

"Ethanol is the best chance... India may be able to reduce sugar surplus by 2 million tonnes," Prakash Naiknavare, managing director of Maharashtra State Co-operative Sugar Factories Federation Ltd, told Reuters in an interview.

The federation represents the sugar factories in the western state of Maharashtra, India's biggest sugar producer.

Earlier, Indian mills were allowed to produce ethanol from molasses, a by-product in sugar manufacturing.

London-based International Sugar Organisation said in a monthly report on Monday India would have a surplus of 11.5 million tonnes, based on its record forecast of 33.15 million tonnes in the crop year that began on Oct 1.

Brazil is expected to produce 32.38 million tonnes, it has said.