Indian traders have struck deals to export 60,000 tons of raw sugar to Iran for March-April delivery, three trade sources said on Monday, marking their first sales of the sweetener to Tehran since western sanctions were tightened at the start of 2012.
The exports are within the ceiling of two million tons of sales already allowed by New Delhi under the open general license (OGL) scheme.
"Traders have contracted exports of 60,000 tons of raw sugar to Iran and the first vessel of 19,800 tons is being loaded at a Mumbai port," a source with the Indian unit of a global trading company told Reuters.
Confirming the deal, another source said Iran would receive the entire quantity between "now and end-April."
They said Iran could buy more sugar from India, the world's top consumer and the biggest producer behind Brazil.
"Until September, Iran needs to import about 324,000 tons of raw sugar," the first source said.
Iran is expected to import 1.6 million tons of sugar in the 2011/12 year, according to the International Sugar Organization (ISO), around 31 percent of the global surplus of 5.17 million tons estimated by the London-based agency.
The Islamic nation bought 1.8 million tons of the sweetener in calendar 2010, the ISO said.
New Delhi and Tehran have set up a mechanism to use the rupee, which is not freely traded on global markets, for 45 percent of oil dues and to pay Indian exporters in order to skirt western sanctions.
India is Iran's second-biggest oil client after China, buying around $11 billion a year, but its own exports to Tehran are worth only about $2.7 billion.
A delegation of Indian exporters has just returned from a trip to Tehran which aimed to boost overseas sales and partially redress the imbalance in trade between the two, but with no major success.
The sugar export deal, however, is in dollars through Dubai-based middlemen, the sources said.
Iran is increasingly finding it difficult to pay in dollars for its crude oil exports, its major foreign currency earner, as the United States and the European Union tighten financial sanctions in an attempt to curb its nuclear ambitions.
As an alternative, Iranian buyers are channeling import payments through unofficial routes involving several layers of middlemen based in Dubai.
Rice exporters from India, Iran's top supplier of the grain, have used the same route but some buyers in the Islamic nation have defaulted on payments.
For the sugar sales, Indian exporters have already received payments from the middlemen involved, these sources said.
Indian sugar mills produced 21.2 million tons of the sweetener between October 1 and March 15, up 14 percent from a year earlier and total output is expected to top 25 million tons. Demand is estimated at around 22 million tons for the year.
The government is considering allowing exports of another 0.5-1 million tons of sugar because of the higher output, after permitting two million tons so far in the 2011/12 season.