Govt extends zero import duty on sugar till June

Anindita Dey / Mumbai Apr 14, 2012,
Business Standard
The ministry of finance has extended the zero import duty on sugar for another three months, adding to manufacturers’ existing worries.

The zero import duty regime was to conclude on March 30. Officials said a review will be undertaken when the new sugarcane crop arrives.

On the other hand, the government has been consistently allowing export of sugar in tranches, to ease a supply glut. Officials said the country was again expecting bumper sugarcane production in the new sugar season.

The zero import regime was implemented in 2010, despite a recommendation to rationalise the duty structure in the range of 15-20 per cent, as with other agricultural commodities.

Both, the ministry of consumer affairs and the ministry of agriculture, have suggested rationalisation of the import duty, since it is in a wide range of zero to 60 per cent. The recommendation proposes capping the duty in the range of 15-20 per cent, official sources said.

According to the Indian Sugar Mills Association (Isma), sugar production increased 14 per cent to 21.2 million tonnes till March 15 in the current marketing year that started in October last year. Sugar production in India, the world’s second-largest producer and biggest consumer, stood at 18.6 million tonnes in the year-ago period.

Maharashtra, the country’s largest producing state, had 7.3 million tonnes till March 15, which is 13 per cent higher than last year. Production in Uttar Pradesh is also up about 13 per cent to six million tonnes. The southern states of Karnataka and Tamil Nadu have also reported higher output of 3.2 million tonnes and 1.08 million tonnes, respectively.

Faced with a severe squeeze on margins, sugar mills are reportedly looking at alternatives, largely in potable alcohol and energy.

While there is a delay in fixing the ethanol price, oil marketing companies (OMCs) had floated a tender in January-February to procure 1,010 million litres during the current season. The ministry of petroleum has approved Rs 34-35 a litre for ethanol, up from the existing Rs 27 a litre. However, this has not been notified, due to stiff resistance from the ministry of chemicals.

OMCs, thus, have not yet started lifting ethanol due to the government’s failure to decide its price. While the industry is demanding an increase of Rs 7 a litre, to Rs 34 a litre for the current season, the ministry of chemicals is resisting, and suggests procuring it at the old price of Rs 27. This is because ethanol is used as a basic raw material for many chemical industries. Thus, in a period of economic slowdown, higher ethanol prices might push up costs at a time when many chemical industries are running below capacity to maintain margins, said a market source.