A year on, India still waiting for Indonesia to relax sugar import norms

The government is waiting for Indonesia to relax norms for importing sugar from India, which is being discussed for more than a year now.

There was a discussion for a two-way deal under which India will give priority to import palm oil from Indonesia against which the latter was offering to buy raw sugar from here.

The discussions started when import duty for palm oil from Malaysia was lower than import from Indonesia during Modi government's first term. Since the issue has now been settled, India has been expecting the latter to act on sugar front. That relaxation has been done partly but the major hurdle for exporting raw sugar is still in place for Indian exporters.

“We in the sugar industry in India have been waiting since last one year for Indonesia to take action on relaxing norms for sugar import from India. Once that happens, it will open up window of opportunity for Indian sugar industry which is facing glut,” said Abinash Verma, Director General, Indian Sugar Mills Association.

A year ago, import duty for palm oil for Malaysia was lower than Indonesia. This was making import from Indonesia unattractive. 

Indonesia approached India to make import duty for both competitors in palm oil at par against which it offered to buy sugar from India. 

India accepted the proposal, however, exporting sugar to Indonesia has two hurdles -- the import duty for raw sugar from Australia and some other countries was 5 per cent while for India, it was a specific duty of $30 per tonne, more than the duty for import from countries like Australia. 

India had asked Indonesia in a government-to-government meeting to make sugar import duty at 5 per cent and relax quality norms for importing raw sugar.

Indonesia has a rule that raw sugar imported should have International Commission for Uniform Methods of Sugar Analysis (ICUMSA) norms of 1200 and above. Indian mills are producing better sugar which has ICUMSA ranging 400-800. Some large sugar exporting countries reduce sugar quality before shipping to make it 1200 ICUMSA when shipped to Indonesia.

Indonesia accepted and bought down the import duty but still haven't made changes in the quality norms. However, officials and ministers from Indonesia have been saying in private conversations to Indian industry officials that it is being done. But no decision has been taken as yet.

However, it will be already late for this season even if Indonesia relaxes the norms now as the current crushing season is ending and mills have started refining raw sugar. Hence, export to Indonesia will be a real opportunity for the next season.

India this week put refined palm oil import under restricted list. Refined oil import has been high off late and 80 per cent was coming from Malaysia. This issue, where Indonesia was at disadvantageous position, has also been addressed with the refined oil import restrictions. Not only that, three days ago, the government called vegetable oil industry officials and informally told them to stay away from importing from Malaysia.

Some industry officials said this is the time for India to assert on Indonesia to open gates for sugar export which will also help reducing glut situation.