The government is on the tenterhooks on the issue of allowing free import of raw sugar without any export obligation as the industry is sharply divided on the issue.
The sugar production in the current year is expected to fall to 20 million tonne (MT) as per industry estimates, while the government maintains that it would be 22 MT. The consumption demand is reported to have increased from 18.55 MT in 2005-06 to about 23 MT at present and is growing annually at the rate of 4%. However, there would not be a major problem as there is a carryover stock of 11 MT from the previous year as per government estimate. However, according to the industry, the carryover stock is 9 MT.
Regarding price, the ruling UPA government, which is gearing up for the polls expected within next three months, can draw comfort. The price inflationary trend measured on point-to-point movement in wholesale price index has declined to 6.84% in the week ended December 6 from a double-digit high a month earlier. This is below the Reserve Bank of India?s comfort level of 7%. Retail sugar prices are ranging between Rs 19 to Rs 21 per kg. Thus, the government need not worry on the price situation as far sugar is concerned for the next four months.
The immediate problem is with a section of the industry, particularly with the co-operative units in Maharashtra and Andhra Pradesh. Nationwide, there was a 20% decline in crop area and subsequent decline in cane production to 295 MT – a fall by 45 MT over the previous year. The co-operative sugar factories have, therefore, asked the government to allow imports of raw sugar without any export obligations so that they can use their idle capacity to the full.
?We want to import raw sugar in the crushing season which has begun from October. Allowing raw sugar imports after the crushing season will not help us,? said the executive director of National Federation of Co-operative Sugar Factories (NFCSF), Vinay Kumar.
The government has already put in place an advanced licence scheme for import of raw sugar against zero duty but with an obligation to export almost the same quantity of processed sugar. The co-operatives want this obligation to be removed at this juncture.
The sugar co-operatives are banking on the Union agriculture and food minister, Sharad Pawar who is also a notable co-operative leader from Maharashtra.
The fact is that raw sugar will need to be imported at some point of time in 2009 when the sugar stock would thin down. A section of the industry led by the Indian Sugar Mills Association (ISMA), has, however, opposed the demand for free import of raw sugar as made by the co-operatives.
ISMA has said that free import of raw sugar without any export obligation at the time of the crushing season would cause a crash in the ex-factory and retail sugar prices which would ultimately handicap the industry to make cane price payments to farmers in time.
US prices for raw sugar is currently ruling around $255 a tonne and its landed price in Mumbai port translates to $ 285 a tonne.
ISMA, which represents large units of better-installed capacities, can afford to wait for import of raw sugar after the crushing season is over.