India Government Weighs Proposal to Cut Import Duty on Sugar from 60% to 15%

The government is examining a proposal to bring down import levy on sugar after duties were restored to 60% from the beginning of current financial as a two-year old order allowing free exports lapsed on March 31, 2011.

The food and consumer affair ministry has proposed a lower 15% import duty in view of the still high food inflation.

The proposal is pending before the empowered group of ministers on food prices and till the time a decision is taken the duties will remain at 60%.

"The food ministry is of the view that duties should not be so high as the government is still fighting food inflation despite sugar prices cooling down," said a government official.

In fact, the minstry has still not issued orders for export of five lakh tonne of sugar allowed by the EGoM last month.

"We have agreed for sugar exports. These (licence) are all departmental procedures. It takes its own time. We are not in haste. We have to first look into our own market," Food Minister K V Thomas told reporters here.

With estimated production of 24.5 million tonnes in the current year expected to be more than domestic demand, the sugar situation in the country has become comfortable.

The wholesale prices of sugar were down nearly 8% in February from a year ago. The retail sugar prices too have come down to 30-32 per kg from about 50 per kg early last year. This was the primary reason why the EGoM did not extend the duty free notification for imports.

However, high food prices continues to be an issue of concern for the government even as food inflation has come below the two digit level, especially with assembly election in five states lined up.

"A decision on bringing down import duties on sugar to 15% is likely to be taken soon as food prices is an important issue for the government," the official said.

The domestic sugar industry feels that there is not much scope for imports as domestic prices were ruling lower than international prices. "Our export prices would be 2 per kg more than what we are selling in the domestic market," said Abinash Verma, director general, Indian Sugar Mills Association.

Import duty was abolished in early 2009 following a fall in domestic production to 14.7 million tonnes against annual domestic demand of 22 million tonnes. India imported 6 million tonnes of sugar since then.