Govt yet to enforce sugar import duty hike

The minister wondered why the market price of sugar was not declining despite an increase in the availability of the commodity in the country. He also contested the current year’s production estimates, released by both the industry and the government, which showed significant differences.

The food minister has gone on record saying that the government is in favour of increasing the import duty on sugar. He also stated that the finance minister, Yashwant Sinha had not opposed the move to increase the import duty. He, however, failed to spell out the cause of delay ineffecting the increase in import duty.

However, sources, both in the government and the industry, disclosed that pressure groups of sugar importers and exporters from abroad are actively trying to influence the government from effecting any increase in import duty at this stage.The director-general of Indian Sugar Mills Association (ISMA), Shanti Lal Jain stated that several multinationals, through their local offices or representatives are engaged in imports of sugar in the country at the existing low import duty.

Jain named some MNCs in this connection like ED&F Man of UK, Cargill International of US, Glencore of UK, Louis Dryffuys of UK, Kerry Foods of Malaysia, Andre of France, Metalman of Germany and Sucden of France. He said that till date 11 lakh tonnes of sugar has been imported involving an outflow of Rs 1,500 crore and these multinationals are making money by importing sugar at low import duty. Besides 18 lakh tonne of sugar has been registered with APEDA for imports.

He said if this processwas allowed to continue it would lead to the closure of the domestic sugar industry. It would be difficult for the industry to pay the cane arrears to farmers which has accumulated to Rs 300 crore by the end of the previous sugar season. In this, circumstances the sugar producers has no alternative left with them, than to `fight the matter to the finish’ until their demand for 50 per cent increase in import duty was met.

The food minister, on the other hand, without directly contesting the industry’s demand for raising the import duty, had posed certain questions before them at the recent inauguration of the 64th AGM of ISMA as to why the market prices of sugar is not coming down despite increased availability of sugar in the country coupled with continual imports of sugar under OGL? Though most of the imports had taken place through the Wagah border in Punjab, even there the prices had not declined "even by 10 paise", the minister said, adding in fact traders in that state were protesting against a fourper cent duty.

The industry has the answer to the minister’s question. The ISMA president, Shishir Bajaj said the break-even point for sugar mills was Rs 14.75 to Rs 15 per kg. This break-even point has increased from Rs 14 to the current level as cane prices have gone up and levy obligations are having an effect on open market prices, he said. As per the levy obligation, sugar mills have to sell 40 per cent of their production to government for PDS consumption at a fixed price, which is much lower than the market rate. Unless industry gets break even cost, it would not be possible for them to survive, Bajaj stated.

He assured the government that there will be no increase in price of sugar at the break-even price of Rs 15 per kg if the import duty on sugar was raised to 50 per cent. He said the average ex-factory sugar price is Rs 13.80 per kg wile the levy sugar is being sold at Rs 11.40 per kg and the prices of free sale sugar in open market is ranging between Rs 15 to Rs 16 per kg. Bajaj said importshave primarily originated from European Union, Pakistan, Brazil, Thailand, Mexico and a few others. All these countries not only subsidise their production and exports, but have imposed very high import duties upto 300 per cent to protect their own farmers and the industry.

Pakistan, which has exported 5.40 lakh tonnes of sugar so far out of 11 lakh tonnes, provides a direct subsidy of Rs 4,500 per tonne while others cross subsidise sugar exports, he said adding that India, despite being a cost effective sugar producer in comparison, is at the receiving end.

Barnala has also contested the industry’s claim for surplus availability of sugar. He has stated that the country’s sugar production is likely to be less than the 150 lakh tonnes anticipated by government and 154.50 lakh tonne as estimated by the industry in view of largescale damage to sugarcane crop. He said that late heavy rains during the last season have affected various areas of the country.