Sugar import duty hiked to 40 per cent

30th April 2015, New Delhi: The Union Cabinet on Wednesday decided to hike the import duty on sugar to 40 per cent from the current 25 per cent to check the slide in domestic prices of the sweetener and enable the industry to clear cane arrears to the tune of Rs. 20,099 crore. This is in line with the demand raised by the industry, cane growers and state governments with whom the government recently held a series of meetings. However, no decision was announced on the demand to create a buffer stock of sugar on government account and industry body ISMA urged the government to quickly decide on its request to buy out 10 per cent of current year's sugar production amounting to 3.5 million tonnes "to help the industry come out of the crisis in the short run and ensure that a major portion of cane price arrears of farmers are cleared before the start of the next sugar season."

The meeting, chaired by Prime Minister Narendra Modi, also decided to waive off 12.6 per cent excise duty on ethanol blending for the next sugar season. The saving will be passed on to the sugar industry/distilleries. It is mandatory for millers to produce five per cent ethanol from molasses for blending with petrol.

At the same time, the government has decided to end duty-free raw sugar imports. Under the Duty Free Import Authorisation (DFIA), exporters of sugar could import duty free, permissible quantities of raw sugar for subsequent processing and disposal. To prevent offloading of sugar made from such duty free imports in the domestic markets, the DFIA scheme for sugar would be withdrawn.

The government has reduced to six months the period for discharging export obligations under the Advanced Authorisation Scheme for Sugar to prevent possibility of any leakage of such sugar in the domestic market. The government steps are to improve the price sentiments relating to sugar, said an official spokesman.

The last few years have witnessed over-production of sugar as compared to domestic requirement. This has depressed sugar prices with the mills having been constrained for liquidity, facing difficulties in clearing cane dues owed to the farmers and impacting incomes of 50 million sugarcane farmers. Similar conditions of subdued prices prevail in the global markets.

Ex-factory prices of sugar have fallen to Rs 22-24/kg in the country, while the cost of production is over Rs 30/kg. Sugar production of India, the world's second largest producer, is estimated to be higher than the domestic consumption for the fifth year in a row this year.