The government on Monday raised the import duty on sugar to 50 per cent from 40 per cent to discourage dumping of cheaper supplies from abroad and as local prices stabilise after a spike earlier this marketing year.
The move will improve the ability of sugar mills to pay farmers for their supplies of cane, according to the sugar industry. The government, however, raised the duty lower than the 60 per cent that some of the mills had demanded to balance the interest of producers with consumers’.
Nevertheless, the hike in the duty comes as a relief for mills amid slowing domestic demand, especially after demonetisation, as the cost of production remains elevated due to high cane prices. A crash in global sugar prices to just 12.55 cents per pound around a fortnight ago had alarmed domestic millers, who had apprehended large-scale imports flooding the domestic market if the duty was not raised.
The landed price of sugar in India would be cheaper by Rs 5 a kg had the global prices stayed at that level. However, international prices have since risen to close to 14 cents per pound now. Hailing the government’s move, Indian Sugar Mills Association director general Abinash Verma said: This will help the sugar industry pay the cane price (fair and remunerative price), which has been raised by 11 per cent for the marketing year starting October 2017 and for which the mills have to continue to get ex-factory sugar prices of at least Rs 36-37 per kg.”
In April this year, the government had allowed duty-free imports of raw sugar up to five lakh tonnes to improve domestic availability, fearing a drop in domestic output in 2016-17 could trigger a spiral in prices to irrational levels. This was for the first time since 2012 that imports of sugar under the open general license (OGL) was allowed at zero duty, albeit in limited quantity.
While the food ministry had projected production to drop to 22.5 million tonnes for the current marketing year through September, down from the official estimate of 25.1 million tonnes in 2015-16, the Indian Sugar Mills Association had pegged output at just 20.3 million tonnes for 2016-17.