Cong urges govt not to hike import duty on sugar

NEW DELHI: Pressure has started to mount within the ruling Congress party against the proposal to hike import duty on white sugar after food minister Sharad Pawar indicated recently the possibility of the relevant Empowered Group of Ministers (EGoM) on prices taking a decision by the end of the month.

The EGoM is expected to consider a proposal to hike duty by around 16% following intense pressure from within the government and differences within the food ministry itself on the issue. The decision is slated to be discussed before early to mid July, when the monsoon session of parliament normally begins.

However, party leaders from Mr Pawar s homestate and top sugar making state Maharashtra have appealed to the government to not impose duty on white sugar atleast until December 2010 as announced earlier, after the crushing season for the new sugar year begins. This is expected to help the government cover the annual consumption needs of around 23 m tonnes besides building a sugar buffer of around 60 mt through imports.

They have conveyed their apprehensions to party president and NAC chief Sonia Gandhi, PM Manmohan Singh and FM Pranab Mukherjee that sugar retail prices could shoot up by as high as Rs 5-6/kg in peak demand and festival season starting October should duty be hiked now.

Wholesale prices are expected to spike by an average Rs 500-600/qtl even if duty imposed on white sugar were around 20% or even slightly lower. It s only over the last four months that this essential commodity has witnessed some price stability and any sudden change in policy or norms will send sugar prices spriralling for consumers. It is being projected that sugarcane farmers will benefit but they will only get the FRP already announced for the 2009-10, said MPCC leader and party spokesperson Kanhaiyalal Gidwani .

In a letter to NAC chief and party president Sonia Gandhi and FM Mukherjee, the party leadership has emphasized Any sudden change in policy in import duty before December 2010 will lead to our losing credibility in the international market and jeopardise ample sugar availability for the peak season in the local markets. It will also prevents already contracted sugar imports from being carried through. Long term planning is imperative to ensure price
stability.

Ironically, sudden downward revision of sugar output estimates by around two million tonnes by the government earlier this year is seen as having triggered off a marked price drop form peak highs in the global and local market. Last week,, the Indian Sugar Mills Association (ISMA) pegged imports of raw and white sugar as equivalent to 5.5 million tonnes (4.75 mt in all) including a carryover of 1.2 m tonnes from last year. Contracted imports to the tune of 0.5 m tonnes are currently expected to land here between June-September 2010. Sugar imports already landed were estimated at 2.75 mt (white sugar) and 0.75 mt (raw sugar).

A Delhi-based commodity monitor asserted High global prices of sugar have prevented traders and millers from entering fresh import contracts since domestic sugar prices are around Rs 2000/tonne lesser. So any duty hike now is unlikely to impact on consumer prices. But a sudden hike in duty could benefit traders and millers who imported heavily earlier this year and have not offloaded stocks on account of poor local prices. Even if global prices soften by October, a duty hike will prevent a fresh flood of imports in peak demand season and mellow prices. In addition, industry, which managed to garner around Rs 10/kg over production cost in the first half of the year could also expect to make up on comparitively big losses since March this year after sugar prices plunged globally and in domestic markets.

Analysts are of the view that current projections of 25 m tonnes of sugar output in 2010-11 are still unreliable. ISMA s fresh estimates for the current 2009-10 year pegged sugar availability at a record 27.4 mt.