As sugar production during the 2010-2011 crop marketing season is expected to be more than output, the government may allow the zero-duty regime to end by December 31.
However, sources said though the import duty on sugar might not be brought back to 60%, some semblance of duty would be there. It could be kept at around 10%-15%, rather than raising it back to earlier levels. Zero duty on sugar imports is valid till December 31, 2010.
Import duty on sugar was reduced to zero in the 2009-10 sugar year (October-September), against the backdrop of low output projections. The move was aimed at allowing companies to import both raw and white sugar to bolster domestic supply at a time when prices shot up to an almost record Rs 50/kg in the retail market. Since then, prices have come down by around Rs 20/kg.
In October/early November, sugar prices in the global market shot up to record highs against tight supply but since then prices for white sugar have dropped by almost $80-100/tonne.
Official projections have pegged sugar output this year at 24.5mt while industry is sticking to its outlook of 25.5 mt against a local consumption demand of only 23mt. The government on Monday allowed exports of 5,00,000 tonne of the sweetener to allow mills take benefit of high global prices.
It also increased the levy sugar price (the price at which government purchases sugar from mills for meeting its PDS obligations) to Rs 1,847.05 per quintal, up 5.09% from last year?s Rs 1,757.50 per quintal. Earlier, it had allowed the export of about 1.5 million tonne of sugar through the Advance License Scheme (ALS) and also the imported sugar stocks that were stuck at ports.
Under ALS, the sugar mills have to fulfill their export obligation of about one million tonnes of sugar by March, 2011 against the duty-free imports during 2004-2009 period. However, till date only 53% of mills have fulfilled their export obligations.
Wholesale price of sugar in some markets on Thursday jumped by Rs 30-Rs50 per quintal, which was termed by most as a knee-jerk reaction to the export announcement and would subside as sugarcane crushing is on in full swing in major growing states like Uttar Pradesh and Tamil Nadu.