The increase is effective January 14. The decision has been taken owing to the declining trend in the international prices of sugar, continuous inflow of imports against the huge export subsidy given by the exporting country, huge carryover stock of sugar in the country, and the need to provide adequate level of protection to the domestic producers.

The sugar industry was lobbying for increasing the basic custom duty to 50 per cent ad-valorem as this, according to them, would ensure a level-playing field.

Industry sources said that owing to the low level of import duty, countries like Pakistan, the European Union, Brazil, Thailand, and Mexico are dumping sugar in India. The exports from these countries are backed by massive subsidies. In rupee equivalent, these subsidies work out to about Rs 23 per kg in case of the European Union, Rs 6 per kg in case of Mexico, Rs 4.50 per kg in case of Pakistan, Rs 4 per kg in case of Thailand, and Rs 3 per kg in case of Brazil. This has resulted in the landed cost of imported sugar being cheaper than domestic sugar.

Industry sources also claimed that the cost of sugar production in the country is less than in other countries. This is reflected in the comparative open-market prices in India and these countries. The present open-market price in India is Rs 15 per kg on an average, while in rupee equivalent, it is Rs 60 per kg in the European Union, Rs 20 per kg in Mexico and Pakistan, Rs 19 per kg in Brazil, and Rs 18 per kg in Thailand.

These countries have also imposed heavy import duty on sugar like 300 per cent in case of the European Union, 173 per cent in case of Mexico, 104 per cent in case of Thailand, 55 per cent in case of Brazil, and 36 per cent in case of Pakistan. Except Pakistan, all these countries have imposed import duty beyond the maximum limit permitted by the World Trade Organisation (WTO).

According to the WTO norms, the EU is permitted to impose import duty to a maximum limit of 160 per cent. In case of Mexico, this maximum permissible limit is 156 per cent, in case of Thailand, it is 94 per cent, and in case of Brazil, it is 35 per cent. Industry sources said that India could increase the import duty on sugar to the maximum permissible limit allowed by the WTO, which is 150 per cent.

They added that actual imports till date stood at 11 lakh tonnes, causing an outflow of Rs 1,430 crore in terms of foreign exchange. An additional seven lakh tonnes of imports are also likely to take place. But according to Government sources, imports from April to November 1998 are only 5.48 lakh tonnes.

At present, the levy sugar price is Rs 10.22 per kg, while the ex-factory sugar price is Rs 13.20 per kg. The sugar industry realises this loss from the 60 per cent free-sale quota. The average open-market sale price is Rs 15 per kg. The release mechanism for free sale is controlled by the Government in every quarter.

As there has been no significant increase in the release quota, the market price is almost stable at this level, despite the landed cost of imported sugar being about $280 per tonne (inclusive of freight cost of about $30 per cent). Thus the cost of imported sugar works out to Rs 11.90 per kg.

INSIGHT

More releases a must

Duty-free imports of sugar under the open general licence are a legacy from Kalpanath Rai. The BJP-led government introduced a 5 per cent ad-valorem duty plus an additional customs levy of Rs 850 per tonne. The sugar industry wanted the ad-valorem duty to be hiked to 40-50 per cent, because Pakistan and the European Union, from whom sugar is imported, subsidise sugar exports.

Sugar prices in the country have, however, remained on the high side. The duty increase to 20 per cent will shut out imports. Prices will firm up unless the government increases releases of domestically produced sugar from brought-in stocks, estimated to cover more than four months consumption. Besides, sugar production this year is slated to exceed the annual consumption requirement.