* India to find it difficult to export sugar withoutincentives
* Rival supplies from Pakistan offered at $340 a tonne
* India domestic price currently at $460 a tonne, FOB
* New Delhi could make it compulsory for mills to export(Adds industry views, comments on export potential from India)
By Mayank Bhardwaj
NEW DELHI, March 20 (Reuters) - India has scrapped a 20percent sugar export tax, a government source said on Tuesday,to help boost overseas sales in a year of surplus production.
Last week Reuters reported that India, the world's biggestconsumer of sugar, would axe the export tax and then make itcompulsory for mills to export a combined 2 million to 3 milliontonnes to cut bulging stocks at home.
The country is likely to produce a record 29.5 milliontonnes of sugar in the 2017/18 season ending on Sept. 30, up 45percent from the previous year, pulling down local prices<SUG-ARMKHP-NCX> more than 15 percent over the past six months.
Shares of sugar companies such as Balrampur Chini Mills Ltd, Dalmia Bharat Sugar and Industries Ltd andShree Renuka Sugars Ltd rose by as much as 5 percenton Tuesday afternoon after the announcement.
The move to scrap the tax helps to improve local sentiment,but lower global prices could make it difficult for India tosell on the world market, said a Mumbai-based dealer with aglobal trading firm who was not authorised to speak to media.
Pakistan, which has decided to give subsidies for sugarexports, is selling the sweetener at $340 per tonne, a priceIndia would find difficult to match, said the dealer.
India's current domestic price for sugar is $460 a tonne,free on board.
In late January, Pakistan increased the amount of sugareligible for export subsidies to 2 million tonnes from 500,000tonnes to reduce its own excess supplies.
If the global market continues to be unattractive for Indianexporters, New Delhi could consider giving incentives to sugarmills to export, government officials told Reuters last week,without giving any details on what they might be.
India could impose a tax on local sales of sugar and usethis fund to give incentives for exports, they said.
Indian mills could also find it difficult to export largequantities of sugar this season as most mills have alreadyproduced the refined white variety by now.
The world market needs more raw sugar than refined, soexports from India could be rather limited this year, industryofficials said.
India's sugar season runs from October to September, butcane crushing gathers momentum around December and tapers off byMarch and April.(Reporting by Mayank Bhardwaj; Additional reporting by RajendraJadhavin MUMBAI; Editing by Tom Hogue)
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