Indian sugar mills have signed deals to export raw sugar for the first time in three years as a rally in New York prices to seven-month highs along with government subsidies made exports lucrative, five dealers and two industry officials told Reuters.

Mills in the world's second biggest sugar producer were reluctant to sign new export contracts until recently as global prices were trading far below local prices.

But a rally in international raw sugar prices along with a rupee hitting a record low has made exports viable.

Mills have contracted to export 150,000 tonnes raw sugar at around $280 per tonne on a free-on-board (FOB) basis for shipment in November-December, the dealers said.

More Indian exports could weigh on global prices and trim the market share of rivals Brazil and Thailand, the world's top two sugar suppliers.

Indian mills traditionally produce white sugar for local consumption, but this year they are planning to export raw sugar as the country faces a surplus harvest forthesecond straightyear.

"In the last few days suddenly

things are moving in favour of Indian mills," said B. B. Thombare, president of the Western India Sugar Mills Association.

"New York raw prices are rising, rupee is depreciating and government has also approved incentives for exports."

India last month approved incentives such as a transport subsidy for export and a direct cane payment to farmers to encourage cash-strapped mills to export surplus sugar in the 2018/19 season.

Many mills were waiting for the government notification after last month's cabinet decision, said a Mumbai-based dealer with a global trading firm. "As notification was published on Friday mills have started signing export deals," he said.

In March, India asked mills to export 2 million tonnes of sugar and fixed a mandatory export quota for each mill.

But mills managed to export only around 450,000 tonnes in the 2017/18 marketing year that ended on Sept. 30 due to uncompetitive prices, said Abinash Verma, director general of the Indian Sugar Mills Association (ISMA).

Mills will try to achieve the export

target of 5 million tonnes in the current year, Verma said.

Apart from raw sugar, mills have contracted to export 100,000 tonnes of white sugar at around $305 per tonne, FOB, for shipment in October-December, three dealers said.

"Whites are going to Middle East and African countries," said a New Delhi-based dealer with a global trading firm.

India could start the new season with inventories of over 10 million tonnes of sugar and could produce another 35 million tonnes in the new season started on Oct. 1, the ISMA estimates.

Indians, known for their sweet tooth, consume about 25 million tonnes of sugar a year.

Indian mills will produce raw sugar at the start of the season for exports as they have ample carry forward of white sugar from last year's crushing to cater local demand, said another Mumbai-based dealer.

The south Asian country could export 4 million tonnes sugar in 2018/19, including around 2.5 million tonnes of raw sugar, dealers said.

In 2007/08 India exported a record 2.7 million tonnes of raw sugar and 2.26 million tonnes of white sugar.