Increase in import duty fails to enthuse sugar industry

NEW DELHI, JAN 16: The industry is not satisfied with the hike in the customs duty on sugar to 15 per cent notified by the Finance Minist...

NEW DELHI, JAN 16: The industry is not satisfied with the hike in the customs duty on sugar to 15 per cent notified by the Finance Ministry today. Despite the hike in duty, imports would continue to be cheaper than domestic sugar, at least by Re 1.50 paise per kg as compared to around Rs 2.25 paise earlier. “It is a right step, but not a whole-hearted one,” says S L Jain, director-general, Indian Sugar Mills Association. According to Jain, there has been a mismatch of objectives between the Government and the sugar sector. “And we object to the use of the word protection. The sugar industry does not require protection. We just want a level-playing field.

According to Jain, the imported sugar would now cost around US $ 335 to 340 or Rs 14,000 per quintal as compared to Rs 12,000 per quintal earlier. The domestically produced sugar that costs around Rs 15,750 per quintal. The break-even price for the domestic producer is around Rs 14,500 per quintal. The sugar sector has been demanding 50 per cent duty onimports. Prior to this, the Government had imposed a 5 per cent customs duty and a countervailing duty of Rs 850 per tonne on sugar imports in an effort to protect domestic sugar mills. The industry had been settled for 40 per cent duty on imports of sugar, which would have been higher than that in Pakistan. In fact, the Union Minister for Food and Consumer Affairs, S S Barnala, had in Parliament talked about raising the duty to 40 per cent.

Finance Minister Yashwant Sinha had apparently shot it down saying it would lead to rise in retail prices of sugar.

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According to a Delhi-based trader, who imports sugar from Pakistan, Europe and Brazil, the market is in a state of flux at the moment. “Much depends on what Pakistan would do to maintain its exports of sugar,” he added. Pakistan had hiked its export subsidies considerably to encourage more foreign exchange earnings in view of its precarious trade balance following economic sanctions imposed on Islamabad for conducting nuclear tests. Import of sugarwould be costlier by around Rs 150 per quintal after the duty hike.At least, 19.5 lakh tonnes of sugar had been registered for import since September 1997 of which 11.2 lakh tonnes has already arrived. According to APEDA, at least 12 lakh tonnes had been registered for imports between September 1997 and August 1998, out of which import registration from Pakistan made up over six lakh tonnes. According to Jain, consumption of domestic sugar had been rising steadily from 122 lakh tonnes in 1994-9, 131 lakh tonnes in 1995-96 to 139 lakh tonnes in 1996-97. “It was only in the last financial year that it increased marginally, to 140 lakh tonnes. And that’s because imports were used to supplement the increased consumption of sugar,” he says.

The sugar industry had maintained that these imports could have an adverse impact on sugar production in the country, which is expected to be revived this season (October 1998-September 1999) to around 150 lakh tonnes from poor output ranging around 128 lakh tonnes duringthe last two season.

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