Govt changes raw sugar import norms

NEW DELHI: The government has approved changes in norms for import of raw sugar under the advanced licence (AL) scheme to keep local prices under
check as production falls.

The decision was taken at a meeting of the Cabinet committee on economic affairs (CCEA) on Wednesday night, but no official announcement has been made. Government officials told that it was decided to hold the announcement until commerce minister Kamal Nath, who is attending the World Economic Forum in Davos, returns to the country.

Officials in the know of the development said the change would involve switching to a tonne-to-tonne import policy compared to the prevailing grain-to-grain policy. This means while earlier mills had to refine and export the same consignment of raw sugar that they had imported, now they can use imported cargo for domestic sale provided they export a similar quantity within two years.

The commerce ministry had objected to the suggestion of a policy change in sugar imports under AL and had, instead, proposed that white or refined sugar be imported under zero duty for sale in the local market.

While the decision may not significantly bring down retail prices from the prevailing Rs 23/kg, it is expected to impact wholesale prices and keep consumer prices relatively static through the 2008-09 season. This is despite a projected output of 180 lakh tonnes, which along with the carryover stock would just clear the domestic demand of 230 lakh tonnes by about a 15 lakh tonnes, thus bringing down the carryover for the 2009-10 season.

The proposal by the commerce ministry would have meant liberalisation of sugar imports. The CCEA decision means sugar imports will be liberalised in a limited manner. According to the change, there will be no quantum loss involved and sugar mills that import raw sugar can re-export, unlike now, from any port instead of from specific port.

The raw sugar imported now under AL has to be exported by mills by 2011. Instead of favouring select mills whose refineries are located close to key access ports such as Haldia, this would mean all mills will have a level-playing field in accessing imports.

In the last three months, sugar prices have shot up on the back of speculation following indications from the government that a quick decision would be taken on the issue of boosting domestic supplies through imports with a view to check prices.

As the ministry kept any decision pending, speculative buying pushed up sugar prices. Trade circles have maintained if the government did not import sugar by the first fortnight of February, wholesale prices would shoot up by another Rs 200/quintal.

A recent study by Indian Sugar Mills Association also has estimated retail price of sugar will remain around Rs 25-26/kg. Retail prices have shot up from only Rs 17/kg in the first quarter of 2008 to Rs 24/kg currently.