India's sugar mills can easily export up to 2 million metric tons of the sweetener this season as domestic supply prospects improve and local prices show a downward trend, the head of a leading industry body said on Wednesday.

"The supply situation looks better than initially expected, which is why the government should allow mills to export at least a million or a couple of million tons of sugar," Deepak Ballani, director general of the Indian Sugar Mills Association, told Reuters in an interview.

Last year, India, the world's biggest sugar producer after Brazil, banned exports of the sweetener for the 2022-23 season, halting shipments for the first time in seven years, as a drought cut cane yields and hit output.

Prime Minister Narendra Modi's administration extended the ban on sugar exports for the second straight season, as India, also the world's biggest consumer of the sweetener, grappled with the prospect of lower cane output.

India's sugar season runs from October to September.

However, India is likely to produce a record amount of sugar in the 2024-25 season after millions of farmers expanded cane cultivation, encouraged by ample water supplies and declining prices of competing crops.

"Since cane planting has been strong, next year's production is expected to be quite robust," Ballani said.

"In anticipation of substantially higher production, sugar prices have dropped, and the permission to export at least 1-2 million tons will help mills struggling with lower prices," he said.

Sugar prices in India have fallen to their lowest level in 1-1/2 years due to ample supplies, making it difficult for mills to pay farmers the cane price.

Ballani said sugar prices had dropped significantly below mills' cost of production of 41,000 rupees ($482.90) per ton.

"Even if the government allows us to export 2 million tons of sugar, we will still have a surplus of 5.6 million tons at the start of the next season on Oct 1, 2025," Ballani forecast. ($1 = 84.90 rupees)

(Reporting by Mayank Bhardwaj Editing by Mark Pottert)