Sugar body seeks probe into DGFT decision

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Published: May 5, 2015 12:08:14 AM

Writes to PM against ‘unilateral decision’ to snatch away right to export the sweetener.

A leading sugar industry body has sought Prime Minister Narendra Modi’s direction for a probe into the commerce ministry’s “unilateral decision” to snatch away the former’s exclusive right to export the sweetener to the EU and the US under a preferential quota system and threw it open to even traders, ignoring the recommendation of the food ministry.

In a letter to Modi, the Indian Sugar Exim Corporation (ISEC) — formed by two leading sugar industry associations representing both private mills and co-operatives and the designated agency for such exports since 1991 — has questioned the motive of the commerce ministry and complained that the move would benefit only a few petty traders at the cost of the entire industry, sources told FE.

The food ministry, the nodal ministry for sugar, had also recommended to the commerce ministry that ISEC be the designated agency for the exports of 10,000 tonne of organic sugar to the EU and 8,200 tonne of raw sugar to the US again in the marketing year through September, one of the sources said.

However, according to the latest notification by the Directorate General Of Foreign Trade (DGFT), any entity or trader can now export sugar to the EU and the US under the preferential quota system, which promises concessional tariff. It has also said while the additional DGFT would oversee sugar exports to the EU, along with Apeda, the Apeda would monitor

the outbound shipments to the US.

“…with a view to extending the benefits of export of Preferential Quota sugar to the EU to the entire sugar industry in the country, the government has now decided to liberalise the export policy in respect of export of Preferential Quota sugar to EU from ‘STE’ to ‘Free’ regime subject to quantitative ceiling notified by DGFT from time to time,” the commerce ministry said in a statement.

ISEC has demanded the notification be kept in abeyance until it’s established on what grounds the food ministry’s suggestions were rejected by the commerce ministry and why the Cabinet decision of 1996 was overruled unilaterally by the ministry. The Cabinet had in 1996 decided that exports to both the EU and the US would be handled by the same agency, and not by two separate agencies, as is the case here.

Although the profits from such exports have been minuscule at around R15-20 crore a year in good times, the timing of such a move has baffled the industry. While the Centre is going all out to enhance the financial strength of cash-strapped domestic mills to get the record cane arrears of R21,000 crore cleared at the earliest, the commerce ministry’s decision seems out of sync with its efforts. Since the country ships out organic sugar to the EU under the quota system, exporters tend to enjoy a higher margin than that on the shipments of the usual raw or white sugar.

ISEC said it has been using the funds generated out of the exports since 1991 for the welfare of the entire industry. The industry body is also sore that traders, who aren’t required to purchase cane mandatorily at high state-fixed prices and aren’t, therefore, vulnerable to huge losses due to elevated raw material costs, are being given the same right to exports as the sugar industry.

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