INDIA: Not all of import quota likely to be used

Published: 06/08/2017, 10:52:21 AM

Sugar prices in the domestic market remain subdued with the government allowing duty-free imports of up to 500,000 tonnes of raw sugar by refineries and mills. Another reason for the suppression is that the global price of raw sugar has fallen sharply, making imports viable even at 40% duty, according to India's Business Standard newspaper.

However, while traders will not have to pay duty on imported sugar that arrives in the current month, they may have to pay 5% IGST for stocks arriving in July.

A trade representative says that under the current market situation, it is doubtful that the entire 500,000-tonne quota of duty-free raw sugar will the exhausted. The wholesale market has seen a one-rupee-per-kg moderation in domestic prices after the quota was announced, despite closure of crushing season. This is because supply from the mills has increased, according to the trade representative.

In the international market, the benchmark sugar no. 11 contract price shed 30% in little less than four months and was trading at 14.1 cent per pound. A few days back, it was trading below the 14 cent level. If prices remain low, imports would make their way to India even after a duty of 40% is applied. The duty is likely to be applied as domestic production is estimated to rise by 25% to about 25 million tonnes in sugar season 2017/18 (Oct-Sept), from 20.3 million tonnes the last season, said an industry executive.

T Sarita Reddy, President, Indian Sugar Mills Association (ISMA), says, "We have made a representation to the PMO (Prime Minister's Office) that import duty should be raised to 60%. With an 11% increase in the fair and remunerative price (FRP) of sugarcane, even 2018-19 production can be bumper and at that time if imported sugar arrives, farmers will find it difficult to sell and mills will be in a fix."

This isn't only issue that impacts both, the sugar industry and the farmers. Another problem area is the 18% GST fixed on the by-product ethanol, which is used as a green fuel for blending with petrol. Thi sis because the price of ethanol was cut last year from INR48 (US$0.75) a litre to INR39 and with 18% GST it is unviable for sugar mills to sell it to oil marketing companies. ISMA has urged the PMO to cut GST on ethanol to 5%.

Since the price of sugarcane, the raw material, will go up by 11% following an increase in FRP, ISMA has proposed a hike in ethanol prices sold to OMCs for blending with petrol.