The Food Ministry of India Proposes 15% Duty on Sugar Imports

The Food Ministry of India has proposed 15% import duty on sugar from July 1 as the country's production is higher than the domestic demand and mills are exporting the sweetener.

In February 2009, the government had abolished import duty to boost domestic supply.

"The zero-duty notification expires on June 30th. We have proposed 15 per cent import duty on sugar," a senior Food Ministry official said.

In March this year, the ministry had proposed 15 per cent duty but the finance ministry decided to extend the duty-free regime till June-end considering high inflation.

Currently, inflation as well as food inflation is over 9%. However, the sugar price in the national capital is stable and ruling at Rs 30-32 per kg, which is significantly lower than the Rs 50 per kg in January 2010.

Concerned over prices falling below cost of production, Indian Sugar Mills Association (ISMA) had yesterday demanded that the duty-free regime on sugar import should end as "this is hurting market sentiments and sending wrong signals to the market about clarity of government policies and intentions".

With surplus availability of sugar in India and when the country is exporting, it neither makes much economic sense to have a duty free regime for imports nor any commercial sense to import now, ISMA noted.

In 2010-11 season (October-September), mills have already exported about one million tonnes to meet export obligations under Advance Licence Scheme (ALS) and is in process to ship nearly 4,50,000 tonnes under Open General License (OGL).

India, the world's second largest producer and biggest consumer, is expected to produce 24.2 million tonne in the 2010-11 season against 18.8 million tonne in the previous year.

The annual domestic demand is 22-22.5 million tonne. ISMA expects sugar output to increase to 26.5 million tonne in the next sugar year on higher cane area.

Import duty on sugar was abolished in early 2009 to boost domestic supply. Before that, the import duty was 60%. In 2008-09 and 2009-10 sugar years, the domestic output was lower than the demand at 14.7 million tonne and nearly 19 million tonne, respectively.

The country had to import about six million tonne of sugar during these two seasons.