After a decade, India will next year resume exporting raw sugar to China as it eyes overseas markets to shed surplus stocks that have muted prices and created financial distress in mills.

India plans to export 2 million tonnes of sugar to China to cut trade deficit with the neighbouring country, a government statement said.

"Export of raw sugar from India to China will begin early next year. A contract for exporting 15,000 tonnes of raw sugar has been entered to by the Indian Sugar Mills Association (ISMA) and COFCO, a Government of China run public sector company," the commerce ministry said in the statement.

India plans to export 2 million tonnes of raw sugar to China beginning from next year, it added.

"Raw sugar is the second product after non-basmati rice that China will import from India. It is a move to reduce the USD 60 billion trade deficit that China has with India," the statement said.

India's export to China in 2017-18 amounted to USD 33 billion, while imports from China stood at USD 76.2 billion.

India produced a record 32.5 million tonnes of sugar in the 2017-18 marketing year and the output is estimated to be around same level or slightly lower in the current marketing year. The annual domestic demand is around 26 million tonnes. The country also has an opening stock of 10 million tonnes at the start of the current marketing year that started last month.

To liquidate surplus stock, Indian government has asked sugar mills to mandatory export 5 million tonnes in 2018-19 and is even announced some financial assistance to facilitate outward shipments.

The government is also negotiating with many countries, including China and Indonesia, to boost exports.

China's sugar production is around 10.5 million tonnes as against its annual demand of 15 million tonnes. The neighbouring country imports sugar to meet its domestic demand as well as to build buffer stocks. It issues quota, twice a year, to traders to import sugar from world market.

"Indian sugar is also of a high quality and is Dextran free because of the minimum time taken from cut to crush. India is in a position to become a regular and dependable exporter of high quality sugar in significant volumes to China," the ministry said.

To bail out the cash-starved sugar industry, the government had in June announced financial package of Rs 8,500 crore to the sector, mainly to boost ethanol capacity.

Later, in September, it approved Rs 5,500 crore package that included production assistance to cane growers and transport subsidy to mills for export up to 5 million tonnes in 2018-19 marketing year.

Under its 'comprehensive policy to deal with excess sugar production in the country', the government approved increase in the production assistance paid to growers to Rs 13.88 per quintal for the 2018-19 marketing year from Rs 5.50 per quintal this year in order to offset the cost of sugarcane to sugar mills.

With low global prices, it also approved export of 5 million tonnes of sugar under the Minimum Indicative Export Quota (MIEQ) during 2018-19 by compensating expenses towards internal transport, freight, handling and other charges.

A transport subsidy of Rs 1,000 per tonne for the mills located within 100 km from ports, Rs 2,500 per tonne for mill located beyond 100 km from the port in coastal states and Rs 3,000 tonnes per tonne for mill located in other than coastal states has been announced.

Besides these financial packages, the government has taken other measures in the last one year such as doubling of import duty on sugar to 100 per cent and scrapping of export duty on it. Minimum selling price of the sweetener has been fixed at Rs 29 per kg.