Ministries now clash over sugar duty hike

However, the finance ministry is believed to be apprehensive about the adverse impact of such a move in terms of prices and a fall in revenue due to a resultant drop in imports.

At a time when the country is heading for a mid-term poll in a few months’ time, the officials are of the opinion that absence of competition between indigenous and imported sugar could create asituation favourable for domestic producers to raise prices.

The ministry officials also argue that rate of price hike (measured in terms of weekly inflation based on wholesale price index) has shown an upward trend from last month. Government sources indicated that Barnala has taken up the issue with the planning commission and the prime minister’s office for building a favourable opinion.

Certain political party sources alleged that reluctance to hike import duty could be influenced by the decision’s possible impact in Maharashtra, where the expelled Congress leader Sharad Pawar had a considerable influence amongst state’s sugar cooperatives. Another cabinet minister, Ramakrishna Hegde, who hails from sugar producing state Karnataka, is reportedly in favour of hiking the import duty.

Sources, however, did not rule out a mid-way solution wherein the finance ministry would agree for a marginal increase in import duty. The domestic sugar industry led by the Indian Sugar Mills Association (ISMA) hadpleaded for an increase in import duty to at least 60 per cent to protect it from unbridled imports of cheaper sugar from Pakistan, Brazil and Thailand.

However, sugar and edible oils secretary R P Sinha had last week said the government would not rush into imposing any further restrictions on cheap imports of sugar in view of upward movement in prices of the commodity in the north.

The imports from Pakistan had dried up substantially from 32,000 tonnes during the first half of May to just 4000 in the second half, industry sources said.

Industry sources said the decline in sugar imports from Pakistan was on account of tension in the border areas and drying up of the stocks in Pakistan. While the cheap sugar imports from Pakistan have subsided, private traders are now turning to Brazil and Thailand for largescale imports. India currently imposes about 27.5 per cent import duty on sugar besides a countervailing duty of Rs 850 a quintal.

According to sources import contracts had risen more than 100 percent during the first two months of the current fiscal mainly from Brazil and Thailand to 3.79 lakh tonnes from 1.80 lakh tonnes during the same period last year.

The import of 3.79 lakh tonnes of sugar is estimated to result in a forex outgo of $ 7.7 million. India is estimated to have imported a total of 1.6 million tonnes of sugar between September 1997 to April 1999.

The country is currently saddled with a huge stock of nearly 23 million tonnes of sugar including the current year’s bumper production of over 15 million tonnes.