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'So sweet of you': Sugar merchants welcome govt move to hike import duty

The Bombay Sugar Merchants' Association has welcomed the hike in the import duty on sugar.

On Wednesday evening in New Delhi, the government announced its decision to raise the basic customs duty on imported sugar from 5 per cent to 20 per cent. The official notification by the revenue department was not yet issued though.

The countervailing duty of Rs 850 per tonne imposed along with the earlier 5 per cent basic customs duty has been retained, taking the total import duty to around 27 per cent.

In a statement in Bombay on Thursday, Mohan Gurnani, president of the BSMA, said that the sugar industry, as represented by the central organisations both in the private and cooperative sectors, has been demanding since quite a few months, for a hike in the import duty to 50 per cent. The current 12 per cent duty has been in vogue since April 1998.

A 50 per cent duty alone can provide a level-playing field for the domestic sugar industry, he said.

The demand was made to protect the Indian sugar industry from dumping by other countries like Pakistan and Brazil. The industry has been pointing out the downtrend in wholesale prices over the last few weeks

Gurnani further stated that any fear that a lower rate of import duty will lead to undue fluctuations in the market prices of sugar is unfounded, because government has the necessary regulatory mechanism to keep a check on market prices.

It is learnt there were differences within the Cabinet on the duty to be imposed. While the food ministry rooted for a whopping 40 per cent hike, the finance ministry expressed fears that any hike without an assurance from domestic segment that price level will be maintained, might prove counter-productive.

The levy sugar is priced at Rs. 10.22 per kg, while the free-sale price is Rs 13 per kg. The average realisation for the industry works out to around Rs. 11.80 per kg, on the basis of the current 60:40 free-sale/ levy ratio. As against this, the landed cost of imported sugar works out to $ 280 per tonne (inclusive of freight cost of about $ 30 per tonne), that is Rs 11.90 per kg.

The industry argued that the low landed cost forces it to charge a low free-sale price, which pushed down overall average realisation below the cost of production of Rs 13 per kg.

India's sugar output during October 1998-November 1999 is expected to touch 15 million tonnes. With opening stocks for October 1, 1998 estimated at 5.5 million tonnes, total availability (excluding imports) is expected to be around 20.5 million tonnes during the current year as against an estimated consumption of 14.5 million tonnes.

Additional reportage by UNI

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