Govt may open door to refined sugar at zero duty

Government is mulling a proposal to let state-run trading companies import ready-to-eat refined sugar at zero duty to bridge the widening gap between local demand and supply. It is also planning to allow mills to import semi-refined sugar at zero duty to keep a lid on prices that could flare up in the summer months when consumption of soft drinks and ice creams rises. India needs to bring in 3 mt of sugar. But as imported sugar is more expensive than local sweeteners at present, there is little likelihood of foreign ships making a beeline for Indian shores. The final decision is expected to be taken by the Cabinet shortly. According to a proposal mooted by the food and consumer affairs ministry, STC, PEC and MMTC would be allowed to import 1 mt refined sugar, without any subsidy from the central government, for sale in the local market. Sugar factories will be allowed to import raw sugar at zero duty without any obligation to re-export an equal quantity of refined sugar over the next two years. This is a substantial relaxation over the current policy under which mills have to bear the risk of international prices dropping when they are ready to export. According to trade estimates, 10.50 lakh tonnes of raw sugar has been contracted overseas under the current policy. “The idea is to create a ceiling on prices by allowing PSUs to import sugar. India's own supply will be around 15.5 mt this year. The figures on cane sowing in Uttar Pradesh are still not available,” said an official here who did not wish to be named. Though the government may do its best to bridge the supply gap, imports may not be viable for either PSUs or mills for now. Take the case of refined sugar. At current prices, white sugar from Brazil or Thailand will cost at least Rs 26/kg after paying sales tax. Ex-mill prices in Maharashtra are currently hovering at Rs 18.25/kg. Similarly, after imported raw sugar is refined here, it will cost around Rs 24/kg, way above ex-mill price of Rs 20.50/kg in Uttar Pradesh. “Even if the government does away with sales tax of Re 1/kg and the cost of Rs 1.20/kg incurred on conforming with the release mechanism, importers won't find it an attractive deal. Local prices have to rise faster to make trade possible,” said the director of a leading sugar mill here.