MUMBAI (Reuters) - Indian mills are holding off on signing new sugar export contracts for the upcoming season as a rally in domestic prices to a 4-year high widened the gap between local and global rates, industry officials told Reuters.“Mills are not signing export contracts, as they are getting far higher prices in the local market,” said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories Ltd. Lower shipments from India could support global prices, as supplies from top producer Brazil are expected to decline, and traders were banking on India to compensate for the shortfall. After shipping out a record 7.5 million tonnes of sugar in the current season, Indian mills have so far signed contracts to export 1.2 million tonnes in the 2021/2022 marketing year that starts from Oct. 1. The bulk of those deals were signed in August, but a surge in domestic prices has since cut new contracts almost to zero, dealers said.Until last month mills were interested in exports as local and global prices were on a par. After local prices jumped, their interest dwindled,” said a Mumbai-based dealer with a global trading firm, who declined to be named due to company policy. Local prices have risen 13% in two months to 36,900 rupees ($500.39) per tonne, the highest since November 2017, after exports surged in the current year and the economy recovered from the COVID-19 crisis. Exporters were offering mills up to 31,5000 rupees and 32,000 rupees for raw and white sugar respectively. Mills are not interested in exporting sugar at a discount to local prices as the government has discontinued an export subsidy in place for the last three years, said another Mumbai-based dealer with a global trading firm. “Mills are waiting for global prices to recover and the Uttar Pradesh government to announce its cane price,” the dealer said. India’s biggest sugar producing state is due to announce its advised price for sugar cane - the mandatory price mills must pay to growers - in the next few weeks. With elections looming, it is likely to be elevated, the dealer said. Global raw sugar prices need to rise above 21 cents per lb to make exports viable from India, or the government needs to once again make it mandatory for mills to export a certain amount of their production, said a New-Delhi based trader. Naiknavare said that despite the current slowdown, India could export more than 5 million tonnes in the new season. “In coming months global prices would rise on lower exports from India, while local prices will correct with new season supplies. It will make exports viable,” he said