Raise import duty on raw sugar, Industry requests government

NEW DELHI: The sugar industry is requesting the government to increase the import duty on raw sugar from 10% to 25% for safeguarding the domestic market from price distortion.

The retail price of sugar is around Rs 40 a kg and the industry fears that if imports are not restricted, prices may fall below rs 32, which is lower than the production cost, leading to a situation which may be beneficial for consumers but not for the local sugar industry grappling with lower price realisation and higher cane arrears.

"International sugar prices have fallen significantly in the last couple of months due to improved sugar production in Brazil and better production in countries like India, Thailand, China and Russia. Cheaper import of raw sugar will depress domestic sugar prices to unviable levels, putting pressure on the sugar industry," said an industry official who didn't wish to be named.

The prices of Brazilian raw sugar are ruling around $500 ( Rs 26,425) a tonne while domestic white sugar prices have climbed by around 25% in the past three months to $680 ( Rs 35,938) a tonne, making imports a profitable proposition. Indian mills are reported to have signed deals with Brazilian companies for imports which may lead a fall in prices in the ensuing festive season.




The strengthening of the rupee against the dollar in the last couple of days has also prompted companies to go for imports. The rupee on Saturday was at a five-month high of 52.85 against the American currency. The Finance Ministry hopes that the rupee may strengthen to Rs 50 against dollar in a few months, which may make things tougher for domestic sugar industry.

"There is a big gap between global and domestic prices. Even if we add a processing cost of $60, an import duty of $50 and other expenses of $30 to per tonne for raw imports, importers will still earn handsome profits at current domestic prices," said a sugar mill owner.

India is likely to produce surplus sugar for the third year in a row although production this year may go down by around 2 million tonne from last year's output of 26 million tonne. This would be due to the lower production expected in drought-hit Maharashtra and Karnataka. Mills in these two states are looking at importing raw sugar to improve their capacity utilisation as they fear scarcity of cane due to erratic rains.

"Such mills can import under the government's Advance Authorisation Scheme, which allows these mills to import at zero duty with the condition that the entire white sugar produced should have to be exported. If import happens under this scheme, there will be no harm to the sugar industry," said another industry official.

However, it appears that it would be unviable to re-export after processing the imported raw sugar to a global market which is already flushed with around 6 million tonne of surplus sugar. Meanwhile, the government has decided to release 4 million tonne sugar in the open market to keep prices under check during festivals in the next two months. "We will not let prices go up in any case. We are prepared to release extra quantity if need be," said a ministry official.