The government on Wednesday allowed duty-free imports of raw sugar up to 5 lakh tonnes to keep domestic supplies steady amid a drop in production.
The government on Wednesday allowed duty-free imports of raw sugar up to five lakh tonnes to keep domestic supplies steady amid a drop in production. However, the duty-free imports will be allowed only until June 12 under a tariff rate quota, according to a notification laid in Parliament. This is for the first time since 2012 that imports of sugar under the open general license (OGL) will take place at zero duty, albeit in limited quantity.
Imports of raw sugar beyond the stipulated quantity and the deadline will, however, attract the 40% duty that has been imposed since April 2015. The directorate general of foreign trade is expected to soon notify the modalities of such imports.
Imports of raw sugar at zero duty will allow a mill or a refiner to sell the sweetener in the domestic market at roughly Rs 3-4 per kg lower (after refining it) than the current ex-mill price of white sugar. At yesterday’s international raw sugar price, the cost of refined sugar in India out of imported raw will work out to around Rs 31-32 per kg, if the sweetener is allowed at zero duty. The ex-factory price of domestic white sugar currently stands at around Rs 35-36 per kg.
Sugar production has been hit hard by dry-spells in Maharashtra and Karnataka, although Uttar Pradesh has witnessed a bumper production in 2016-17. The decision on limited duty-free imports comes barely three weeks after the announcement of the result of the assembly polls in Uttar Pradesh, which has been the traditional epicentre of massive cane arrears due to the state government’s arbitrary fixation of cane prices.
“The decision to allow limited duty-free imports is aimed at keeping domestic supplies steady in case consumption picks up and also to have adequate stocks by the end of this season so that there is no scarcity before the new sugar comes in. However, as of now, we don’t have any real shortage of sugar due to massive carry-forward stocks from 2015-16,” said a senior government official. While the food ministry has projected production to drop to 22.5 million tonnes for the current marketing year through September, down from the official estimate of 25.1 million tonnes in 2015-16, the Indian Sugar Mills Association has pegged output at just 20.3 million tonnes for 2016-17.
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The shortfall in production led to calls by refiners and traders for scrapping or trimming the 40% import duty on sugar (both raw and white).
The millers, however, have been maintaining that although production will take a hit, plentiful carry-forward stocks from 2015-16 will more than offset the shortfall and there is no need to scrap the import duty.
“Considering the opening balance of 77.5 lakh tonnes, (which has been reported by all sugar mills to the government) and considering an estimated sugar production of 203 lakh tonnes in the current season and consumption of 238-240 lakh tonnes, the closing balance in the current season would be 40-42 lakh tonnes. This balance will be enough to meet the domestic requirement till almost end of November 2017,” ISMA had said last month.
To tide over a massive local shortage in 2008-09, the government had allowed import of raw sugar at zero duty under the OGL from April 17, 2009 through June 2012. Thereafter, a moderate duty of 10% was imposed in July 2012, which was increased to 15% in July 2013 and subsequently to 25% in August 2014.
The import duty was raised further to 40% in April 2015. Thereafter, there had been hardly any import of sugar under the OGL. However, imports of raw sugar under the advance authorisation scheme (for subsequent exports) have been continuing at zero duty.