Zero import duty on sugar to stay for another 2 months

The import duty on sugar will continue to remain nil till August 31, till the new crushing season starts in October.

Officials said a final decision will be taken by the finance ministry. It may decide to align the duty structure according to the recommendations of the food ministry.

Faced with high food inflation, the government in January exempted sugar imports from Customs duty till March 31, further extended till June 30.

Prior to the zero duty regime, sugar imports attracted 60 per cent duty. The food ministry has recommended aligning it to 15-20 per cent as against the high rate of 60 per cent, officials said. The finance ministry, however, is considering bringing down the import duty from 60 per cent to 15 per cent, albeit with ad valorem of four per cent. Ad valorem duties are levied according to the value of goods and are usually expressed as percentages of value. Such duties are distinct from specific duties imposed on the commodity.

The Indian Sugar Mills Association has reportedly pegged the production at 24.2 million tonnes (mt) in the current sugar year, as against 19 mt in the 2009-10 (October-September). The annual domestic demand stands at 22-22.5 mt. Currently, around five million hectares is under sugarcane production.

In April 2009, the government had abolished import duty on sugar, as domestic output had declined sharply to nearly 15 mt against the annual domestic demand of 23 mt. In April this year, the government had allowed 500,000 tonnes sugar exports under OGL.

The food ministry has been easing stock holding limits for sugar as well, following robust production estimates. In March, an empowered group of ministers had relaxed the limit on sugar to 500 tonnes per month from the earlier limit of 200 tonnes. For July, the monthly quota of domestic sales was brought down to 1.77 mt from 1.87 mt in the previous year.

Import duty on sugar was abolished in early 2009 to boost domestic supply. Before that, the import duty was 60 per cent. In 2008-09 and 2009-10 , the domestic output was lower than the demand at 14.7 mt and nearly 19 mt, respectively. The country had to import about six mt of sugar during these two seasons.