Govt for duty-free import of 1mn tonnes of sugar

To prevent sugar prices from becoming a tool in the hands of opposition parties in the parliamentary elections, the government has allowed government agencies like MMTC, STC, NAFED and PEC to import one million tonne of white sugar duty-free. The export obligation on raw sugar imports under open general licence scheme has also been removed.

"No levy or release mechanism will be imposed on the imported sugar. We expect this move to augment domestic availability and cool prices. With the decline in crude prices, Brazil, the largest sugar producer, plans to divert a significant quantity of sugarcane from ethanol to sugar. This will improve international supplies," said official sources.

The move comes as the country's sugar output is projected to touch a four-year low. This shortage follows two years of oversupply, when the government had to provide mills with export assistance. Earlier this year, the government had allowed duty-free imports of raw sugar, but with an export obligation.

In the past six months, retail sugar prices have risen about 25 per cent to Rs 25 a kg, owing to a dip in output. Latest projections by Indian Sugar Mills Association (ISMA) show that India is likely to produce 14.5 million tonnes of sugar in the current sugar year (October-September), down over 45 per cent from 26.5 million tonnes in the previous year.

However, along with the opening stock of 8 million tonnes and raw sugar imports of 1.5 million tonnes, the season's availability will be 24 million tonnes, against consumption of 22.5 million tonnes.

White sugar imports are expected from Thailand and some countries in Europe where the price is $360 a tonne against $400 a tonne quoted in the London market. "Since freight rates are quite low, the landed cost of imported sugar should be around Rs 19,000 a tonne, cheaper than the wholesale price of Rs 20,000 to 21,000 a tonne," said Rajendra Shah of Vichi Agro Products, a Mumbai-based importer.

Sugar has a weight of 3.62 per cent in the wholesale price index, more than cement (1.73 per cent), wheat (1.38 per cent), but less than iron and steel's combined weight of 3.64 per cent.