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Tuesday, July 05, 2022

Bid to cool inflation: Curbs on sugar export; duty-free import of sunflower, soyabean oil

The Centre also announced duty-free import of 20 lakh MT each of crude soyabean oil and crude sunflower oil per year for two financial years (2022-23 and 2023-24).

By: Express News Service | New Delhi |
Updated: May 25, 2022 9:51:25 am
india import export sugar sunflower soyabean oilIndia is the biggest producer of sugar in the world and the second largest exporter after Brazil. (File Photo)

Within A fortnight of banning wheat exports and continuing with its fiscal policy measures to douse domestic inflation, the government Tuesday announced curbs on exports of sugar effective June 1 and allowed duty-free import of 20 lakh metric tonnes of crude soyabean oil and crude sunflower oil a year for two financial years (2022-23 and 2023-24).

To maintain “domestic availability and price stability of sugar”, the government said it would allow exports of up to 100 lakh (10 million) MTs of exports during the current sugar season (October 2021 to September 2022).

Moving raw, refined and white sugar to the restricted list from free for export purposes, a notification by the Directorate General of Foreign Trade (DGFT) said, “With effect from 1 June 2022 up to 31 October 2022 or until further orders, whichever is earlier, export of sugar is allowed only with specific permission from Directorate of Sugar, Department of Food and Public Distribution (DFPD, Ministry of Consumer Affairs, Food & Public Distribution. Detailed procedure for issue of necessary permissions for export of sugar will be notified separately by the Department of Food and Public Distribution.”

India is the biggest producer of sugar in the world and the second largest exporter after Brazil. The move comes in a year when the country is set to register its highest-ever exports. “Contracts for export of about 90 lakh MT have been signed in the current sugar season 2021-22. About 82 lakh MT sugar has been dispatched from sugar mills for export and approximately 78 lakh MT have been exported. Export of sugar in the current sugar season 2021-22 is at its historic high,” a source said.

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Sources said the closing stock of sugar at the end of sugar season (September 30, 2022) remains 60-65 lakh MT which is equivalent to about three months’ stocks required for domestic use. “The government has been continuously monitoring the situation in the sugar sector including sugar production, consumption, export as well as price trends in wholesale and retail markets all over the country,” a source said.

The Centre also announced duty-free import of 20 lakh MT each of crude soyabean oil and crude sunflower oil per year for two financial years (2022-23 and 2023-24). The move – nil customs duty and nil agricultural infrastructure and development cess – will bring significant relief to consumers, the Central Board of Indirect Taxes and Customs said in a tweet.

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The change in tariff rate quota will be effective from May 25 this year till March 31, 2024. India, which imports nearly 60 per cent of its edible oil needs, has seen prices surge this year amid a broader spike in international prices following Russia’s invasion of Ukraine that squeezed the supply of sunflower oil. Added to that was a recent ban by Indonesia to curb palm oil exports before Jakarta replaced the ban with a domestic sales quota.

This comes at a time when the government is struggling to contain severe inflationary pressures, with prices of food, fuels and crop nutrients soaring.

Retail inflation rate had surged to an eight-year high of 7.79 per cent in April, while wholesale inflation has been in double digits for 13 consecutive months. Retail edible oil inflation remained at 20-35 per cent level all through 2021, with the latest print for inflation rate for oils and fats recorded at 17.28 per cent for April.

The Centre announced tax cuts on petrol, diesel, coking coal, and raw materials for making steel over the weekend as part of its efforts to cool mounting inflationary pressure. According to some analysts, the cut in fuel taxes could help reduce inflation directly by around 20 basis points in June when its full impact will be visible. The second-round effects are likely to be equally strong.

The Reserve Bank of India, while reducing the repo rate by 40 bps in an out-of-turn monetary policy meeting earlier this month, had expressed concern over high food and fuel prices feeding into inflation.

While this decision will have a moderating influence on price pressures in the economy, the worry is that inflation has become entrenched and is likely to remain above the RBI’s medium-term inflation target of 2-6 per cent.

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