Sugar industry sees red on duty-free imports

The domestic sugar industry, through its apex body Indian Sugar Mills Association (ISMA), has protested any government move to allow duty-free imports of white sugar. The move, it claims, will bring down prices and impact the industry’s capacity to make payments to sugarcane growers. The government is contemplating reducing the import duty on refined sugar to zero from 60 per cent in view of the rising sugar prices in the domestic market.

Retail sugar prices have risen by about 30 per cent to Rs 26 a kg owing to a dip in the output. According to ISMA, domestic sugar output during the 2008-09 season (October-September) has been estimated at a four-year low 15.5 million tonnes, down over 45 per cent from last season. However, along with the opening stock of 8 million tonnes and raw sugar imports of 1.5 million tonnes, the season’s availability will be 25 million tonnes against a consumption of 22.5 million tonnes.

“Any import of raw sugar at nil duty will be a kind of bailout to the Brazilian farmers. If that happens, Indian farmers would be terribly hurt. Moreover, enough sugar is available to meet domestic consumption,” said Vivek Saraogi, managing director of Balrampur Chini Mills and vice president, ISMA.

With the decline in crude oil prices, Brazil may divert sugarcane from ethanol to sugar, resulting in higher output. This would have a downward pressure on international prices, ISMA President Samir Somaiya said. “The price control benefits only bulk consumers like food processors and sweetmeat makers,” he added.

A KPMG study has found that these institutional buyers account for around 70 per cent of the domestic consumption.

Sugar prices have moved up in tandem with the sugarcane prices. “We cannot disconnect sugar prices from sugarcane prices,” Somaiya said. Sugarcane prices in Uttar Pradesh, the country’s second biggest sugarcane producer was increased by Rs 15 a quintal to Rs 140.

The price rise has prompted the government to relax raw sugar import norms and imposition of stock holding limits on sugar. Freight assistance on export was withdrawn. Sugar has a weightage of 3.62 per cent in the wholesale price index, more than cement (1.73 per cent), wheat (1.38 per cent) and just lower than iron and steel’s combined weight of 3.64 per cent.

This is the reason that any price rise attracts the attention of the government.

ISMA officials said the ex-factory prices have crashed by Rs 150 a quintal (to Rs 2,250 in UP) following the announcement of stock limits.