India will export sugar in 2010/11 and ship out more wheat in diplomatic deals, the farm minister said, signalling improving food supplies squeezed by last year’s drought.

Sugar output in India, the world’s biggest consumer, is likely to exceed its annual demand of 22-23 million tons for the first time in three years as farmers are planting more cane and normal June-September monsoon rainfall is forecast. “Definitely, India will export (sugar) next year,” Sharad Pawar told reporters at the Indian Women’s Press Corps. India became a sugar importer last year after a severe drought hit cane output and triggered a rise in food prices.

The Indian government has struggled to control inflation, which soared to a 17-month high of 9.9 percent in March, but Pawar said the outlook for food supply and prices was improving.

“Definitely the worst is over,” he said.

But the government is still adopting a cautious approach, and Pawar said India was in no hurry to impose a tax on imports of sugar or refined vegetable oils.

Sugar and edible oils producers are demanding a tax to prevent a flood of cheap imports which would hurt local producers, but officials say the government would assess the progress of monsoon rains before taking a decision. Pawar said the government was collecting information about sugar production and observing the progress of cane planting.

Sugar output in India, the world’s top consumer, was likely to rise to 24-25 million tonnes in 2010/11, from an estimated 18.5 million tonnes in the current year, he said.

In 2008/09, sugar output fell 44 percent to 14.7 million tonnes after a drought, making the country a big importer and proving a key factor that propelled benchmark New York futures to a 29-year high of 30.40 cents per lb in February. But as prospects of supplies improved and import demand from large buyers like India weakened, prices plunged to a one-year low this month after an unprecedented 12th weekly loss.

An economist at the International Sugar Organization forecast a global sugar surplus of 2-3 million tons after a deficit of 8 million tons in 2009/10.

Last year, the worst monsoon in 37 years damaged farms, encouraging India to ease import controls and restrict exports of a number of food products.

But the wheat harvest in 2010 is set to rise to a record, exceeding demand for the fourth straight year, encouraging the government to allow limited exports of the grain to some countries.

India has allowed exports of 400,000 tons of wheat to neighbouring Bangladesh. Earlier, it had allowed small exports to Nepal.

“These are under diplomatic channels. This was advised by the foreign ministry,” Pawar said.

“Yes, we will give more,” he said when asked if more such deals were in the offing.

However, the government would not allow unrestricted wheat exports until the end of the monsoon season, he said. (Reuters)