Sugar price set to rise as government hikes import duty

The government Monday announced that import duty on sugar will be raised to 40 percent from the current 15 percent and provide support in boosting exports, with a view to help the debt-ridden mills and farmers.

The move is expected to result in a spike in sugar prices in the domestic market.

Talking to reporters after meeting sugar industry officials here, union Minister for Food and Civil Supplies Ram Vilas Paswan said the government has decided to facilitate exports with a view to helping farmers.

"We have reached a consensus to raise the import duty to 40 percent and to consider other incentives to help mills pay dues to farmers," Paswan said.

Paswan said the government will provide additional interest-free loan of Rs.4,400 crore to cash-strapped sugar mills to help facilitate payments to farmers.

"We will also extend sugar export subsidy of Rs.3,300 per tonne till September," he said.

Paswan said the government has also decided to raise the mandatory blending of ethanol in gasoline to 10 percent from five percent.

Reacting to the move, sugar mills lobby said the steps would help improve liquidity in the system and benefit mills as well as the farmers.

"These key decisions would benefit the industry and improve the liquidity of the sugar mills, which would help the industry to clear the pending payments to the cane farmers at the earliest," said Abinash Verma, director general, Indian Sugar Mills Association (ISMA).

Verma said the 10 percent ethanol blending would save foreign exchange (forex) of $1.6 billion to $1.7 billion, which is a huge plus for the country as it would improve the revenue deficits.

"There is a need to improve the sugar prices to allow mills to at least cover their cost of producing sugar. A 40 percent duty on sugar import would ensure that no sugar from other nations makes its way into the Indian markets, as we already have about 20-25 lakh tonnes of surplus sugar with us," said Verma.

"This would definitely improve the market sentiments, domestic sugar prices, and better buying by the traders and wholesalers," he added.