Mills pause after signing deals to export 4 mln T-dealers Diversion of sugar for ethanol reduces stockpiles-dealers Global prices need to rise to make exports viable- dealers MUMBAI, Jan 11 (Reuters) - Indian mills are holding off on signing new sugar export contracts as falling global prices and a strengthening rupee have widened the gap between local and global rates, industry officials told Reuters. Lower shipments from the world"s No. 2 sugar producer could support global prices , that fell to their lowest in 5-1/2 months on Monday but could also prompt Indian mills to divert more sugar for ethanol production. "At current price level exports are not viable from India. Mills are getting much higher prices in the local market," said Ravi Gupta, chairman of export committee at All India Sugar Traders Association (AISTA). In the local market mills were selling sugar at 32,000 rupees to 35,000 rupees per tonne compared to around 30,000 rupees offered for overseas shipments, dealers said. Mills aggressively sold sugar when international prices were around 20 cents per lb, said Rahil Shaikh, managing director of MEIR Commodities India. Stockpiles have come down to comfortable levels and there is no pressure on mills to sign new deals, Shaikh said. Indian mills have so far signed contracts to export 4 million tonnes of sugar in 2021/22 marketing year ending on Sept. 30, dealers estimate. The country exported a record 7.2 million tonnes of sugar in 2020/21, taking advantage of the government subsidy for overseas sales. "Surplus has gone down because of last year"s record exports and continuous diversion of sugar for ethanol," said B.B. Thombare, president of the West Indian Sugar Mills Association. New Delhi has raised the price at which oil marketing companies will buy ethanol from sugar mills, making production of the biofuel lucrative. Most of the sugar exports contracts were signed by mills in western state of Maharashtra and neighbouring Karnataka, but mills in top producing Uttar Pradesh were holding off because of higher local prices, said Gupta of AISTA. "Mills are focusing on executing signed contracts rather than singing new deals. If international prices come closer to Indian prices, then only mills will come forward," said a Mumbai-based dealer with a global trading house, adding the country could export 6 million tonnes in the current season.