New raw sugar import policy nails defaulters

Written by Sanjay Jog | Mumbai | Updated: Feb 1 2009, 03:57am hrs
Even as sugar mills across the country await a formal announcement from the government on easing raw sugar import norms, sources said that under the new rules, millers who default on fulfilling their re-export obligation will now have to pay a 60% import duty instead of the current practice of a extension with penalty.

Currently, any sugar mill which imports raw sugar under the advance licence obligation for re-exports in processed form on a grain-to-grain basis, has to fulfil the obligation within 24 months, failing which a penalty is imposed on the miller.

However, sources said that under the changed rule, a miller will have to pay full import duty of 60%, instead of the penalty. A formal notification detailing the changes is likely to be issued by early next week, a senior government official said.

Meanwhile, a few millers who are striving to cope up with the shortfall in sugarcane availability during the ongoing crushing season, said that the Centres expected decision could help as it has come at a time when international raw sugar prices are at a reasonable level of 12 to 12.5 cents per pound ($250-$260 per ton CIF) and countries like Brazil (the worlds largest producer) are flooded with raw sugar and desperate to offload at any price. The export obligation of 24 months is going to come in to effect around 2011-12 when India is expected to be having a record sugar production and abundant inventory. This policy would be helpful for states not situated near ports as now they can get duty-free raw sugar imports, meet domestic requirement and complete export obligation by buying white stocks from states located near ports, a senior industry official who did not wish to be named, said.

However, presenting a contradictory view, few small sugar millers in Maharashtra argued that the timing of easing the norms was not right as most of crushing would end by February and the raw shipments would start from March. This means that mills might have to remain idle for some time and that could hurt them further. Moreover, many small cooperative sugar mills in the state dont have the necessary expertise to process raw sugar, another industry official said. The governments claim that it would ease sugar prices is also unfounded and at best, prices could come down by Rs 40-Rs 50 per quintal before rising again as fundamentals still remain distinctly bullish, observers said.

Sugar in the 2008-09 crop season that started in October is projected to fall to around 18 million tonne because of low acreage and yields. Last year, India produced around 26.4 million tonne of sugar.