The association fears that if import duty is not increased to a substantial level, the sugar industry in the country would be completely destroyed.

Speaking to The Financial Express, director-general, ISMA, SL Jain said that after the south-east Asian crisis all sugar producing countries except India raised their import barriers significantly. "The increase in import duties was in anticipation of a drop in international prices as traditional buyers of sugar were not in a financial positionto continue purchases at the previous levels. However, India took no measures to safeguard its domestic producers."

Jain says that international sugar prices continued to drop from September' 97 creating trouble for the domestic industry. From $350 per tonne, prices have now reached $187 per tonne. "The price of sugar in the open market in India is already higher than what it actually should be. This is because we have to compensate for losses we incur from the compulsory sale of 40 per cent of our total output to the government at prescribed prices. It is only natural that our industry has started crumbling under the pressure of a continuous decline in international prices."

Import duty on sugar fixed at 27.5 per cent in India is abnormally low when compared to the import duties in countries which are exporting sugar to India, says Jain. The European Union has imposed an import duty of 300 per cent, Thailand has an import duty of 104 per cent, Mexico has imposed a duty of 103 per cent while Brazil hasimposed a duty of 65 per cent.

Jain says that countries in the European Union are heavily subsiding sugar in their countries which is allowing sugar manufacturers to literally dump sugar in India at very low prices.

"According to the WTO agreement any country's subsidy cannot be challenged for the next nine years. So we cannot take any measure against it."

However, Jain points out that even within the ambit of the WTO, measures can be taken to protect the domestic industry. "The WTO allows a country to impose am import duty of 150 per cent. Even if our government imposes a duty of 50 per cent, the sugar industry can be saved."

The increase in import duty which has taken place in the country so far has been slow and highly inadequate, feels Jain. "The government takes so long in effecting increases that the international equations change and prices drop further by the time a small increase in duty takes place." Painting a grim future for the sugar industry in the country Jain says that if thegovernment does not take any immediate step to bail the industry out, sugar production will come to an end. "We already owe our farmers more than Rs 2,000 crore and they are also holding a large unsold stock of sugarcane. If farmers don't get money for their crop, they will stop producing sugarcane and shift to some other option."

When production in the country stops, international prices will also rise as sugar consumed by India accounts for nearly 25 per cent of the stock being sold in the world market, says Jain. "We should not forget that international sugar prices were as high as $600 per tonne in the seventies. If our sugar producing capacity is destroyed then we will be forced to import sugar however high the prices may be."