Govt may raise duty-free sugar import cap

NEW DELHI: Duty-free white sugar imports into India could be upped by another one million tonnes (mt) to boost domestic availability and keep prices under check. The deadline for imports may be extended to March 2010. The earlier ceiling of one million tonnes of import laid down by the government for the period up to September 30 has almost been achieved.

Currently, white sugar imports at nil import duty have reached around 803,000 plus tonnes against the prescribed cap. Of this, some 300,000 tonnes of the sugar already contracted for imports have arrived at Indian ports.

According to a government official, the quantum of duty-free white sugar imports could go up by another million tonnes in the current sugar year primarily on account of the poor sugarcane output of only 15-16 million tonnes projected for 2009-10 as well, an 8 million tonnes shortfall against domestic consumption.

The near 8 million tonnes deficit is being met through the buffer stock and imports. The new crushing season began on October 1 and runs up to September 30, 2010.

The government made white sugar imports duty-free in April this year, besides exempting all overseas purchases of raw (or unprocessed) sugar free of re-export obligations. At the time, three PSUs including the STC and MMTC and Nafed were allowed to import up to one million tonnes of sugar against a September 30 (or the end of the 2008-09 sugar year) deadline.

The cap on white sugar imports were kept low in the face of stiff opposition from domestic sugar firms who are currently making up for the acute sugarcane shortage by importing raw sugar at zero duty and processing it.
The government had allowed state-run trade companies to import up to one million tonne zero-duty white sugar till September 30 to help meet local supply requirements.

But looking at the poor response from state-run enterprises, it later decided to allow even private players to import duty free white sugar till November 30, subject to the same cap of one million tonnes. However, there has been very poor response from the private sector to this since white sugar prices have shot through the roof in global markets and, even at zero duty, imports have proved economically highly unviable for them.

Sugar retails at around Rs 32-34/kg currently and is expected to shoot up to Rs 40/kg on the back of a recent decision by the government to change the minimum support price regime for sugarcane to one ���fair and remunerative price���, which could prove to be some 60% higher. Industry is expected to pass on the price hike to the sugar consumer.