Duty-free white sugar import extended; output seen at 16 MT

The government will extend the period of duty-free refined sugar import by over a year till December 2010 to help check domestic prices as projected sugar output at 16 million tonnes this season will fall short of demand.

The Centre has also decided to tweak the method of fixing price of sugar sourced from mills for the public distribution system (PDS) to ensure supply to the poor at a time when open market prices have almost doubled in a year to Rs 36 a kg. India needs about 23.5 million tonnes of sugar to meet its annual requirement.

"Sugar production this season (starting this month) is likely to touch 16 million tonnes. So, the situation is tight. But requirement will definitely be met... (Duty-free) refined sugar import has been extended till December 2010 (from November-end 2009)," Food and Agriculture Minister Sharad Pawar said here today.

The country has contracted to import seven lakh tonnes of refined sugar so far, of which three lakh tonnes have already landed, according to a senior government official.

Pawar said the Cabinet has also decided to put in place a new system whereby states paying more for cane than the Centre's benchmark rate would have to shell out money in sugar procurement for the PDS, technically called levy sugar, in sync with the rise in their own cane rate.

At present, mills are mandated to sell 20 per cent of their output for the PDS at an average rate of Rs 13.22 a kg, a price fixed by the Centre based on its own benchmark price of sugarcane —  the statutory minimum price (SMP).

However, since some states fix much higher prices than the SMP for the sale of cane to mills in their respective territories, technically called state advisory price (SAP), the mills have protested against fixing of the levy price on the basis of SMP.

Pawar said the Centre would now take into account the  SAP, too, while fixing the levy price. States, which fixes higher SAP, will have to pay a higher levy price to mills. And the difference between the Central levy sugar price and the rate applicable for a particular state based on its SAP will have to be borne by the state itself, the minister explained.

Earlier this month, the sugar industry has sought upward revision of levy price after the government directed sugar millers to sell 20 per cent of their output to it for supply under the PDS from 10 per cent earlier.

The industry, which would otherwise have sold 10 per cent of their output more in the open market at higher prices of about Rs 36 a kg, sought a higher levy price.

The government sells sugar at Rs 13.50 a kg through ration shops. The country needs about 28 lakh tonnes of sugar a year to run its PDS.