India, the world’s second-biggest sugar maker, may produce 1.2 million tons less this year than forecast last month because of lower yields in the main cane growing state, likely tightening global supply. Production in the year ending Sept. 30, 2009, may total 18 million metric tons, compared with 19.2 million tons forecast in December, S.L Jain, director general of the Indian Sugar Mills Association, said in an interview today. “The use of a pesticide in northern India in the past two months had a negative impact on sugar accumulation and maturity of the crop,” Jain said. Lower Indian output may widen a global deficit forecast at 5.8 million metric tons in the 2008-09 season by Czarnikow Group Ltd., supporting New York sugar prices that have risen 9 percent in the past three week. The South Asian country may permit duty- free imports of raw sugar to boost domestic supplies, Agriculture Minister Sharad Pawar said this week. “This will have a positive impact on global prices as the shortage will lead to imports,” said Harish Galipelli, head of research at Karvy Comtrade in Hyderabad, a southern Indian city. Raw-sugar futures for March delivery rose 4.6 percent to 11.96 cents a pound on ICE Futures U.S. in New York yesterday, the biggest gain for a most-active contract since Dec. 8. Sugar mills’ shares rose in Mumbai trading. Bajaj Hindusthan Ltd., India’s biggest sugar maker, gained as much as 4.5 percent to 57.8 rupees. Balarampur Chini Ltd., the second-biggest, added as much as 5.5 percent to 52.8 rupees and Shree Renuka Sugars Ltd. gained as much as 3 percent to 68.7 rupees. Production may total 20 million tons in year to September compared 26.4 million tons a year earlier, Farm Minister Sharad Pawar said last month. Output may decline to 19.5 million tons, the Maharashtra State Cooperative Sugar Factories Federation Ltd. said Jan. 6.

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