The Centre on Friday raised the import duty on raw and white sugar by 10 percentage points to 25 per cent. But it took consumers’ interest into consideration by limiting the hike against the industry’s demand to raise it to 40 per cent.
The Customs duty has been raised from 15 per cent to help sugar mills struggling from lower realisation and a glut.
The development also fired up sugar stocks, which increased by over 3 per cent for almost all companies.
“The sugar industry welcomes the Government’s decision to raise sugar import duty from 15 per cent to 25 per cent. At the current prevailing global prices of sugar and rupee-dollar exchange rate, the move…will make sugar imports into India unviable,” said Abinash Verma, Director-General, Indian Sugar Mills Association (ISMA).
However, the increase falls short of the hopes raised by the Government. Food Minister Ram Vilas Paswan had said in June that the import duty would be hiked to 40 per cent as demanded by sugar mills. But earlier this month, Paswan added a rider saying that the duty hike would be made only if sugar companies cleared the ₹8,703-crore arrears due to cane growers. Mill owners in Uttar Pradesh alone owe growers some ₹5,304 crore.
The duty hike is lower than what was initially assured, ostensibly, to prevent an increase in retail prices of sugar. Some industry observers feel that a 40 per cent duty will add to consumer woes as mills may raise prices in the event of imports becoming unviable. An industry official said that chances of a price rise are minimal as there is surplus in the market.
The industry had demanded curbs on sugar imports due to a glut, with stocks at the end of the 2013-14 season to September likely to be around 2.5 million tonnes, going by an ISMA estimate. A decline in global market led to prices falling below the cost of production, said mill owners. They said that the losses they had incurred affected their ability to pay farmers for the cane supplied to them and repay debts to banks.
Earlier this month, UP millers said that they had been incurring a loss of ₹5.50 for every kg of sugar produced as the ex-factory realisation was ₹31.5 against the cost of production of ₹37/kg.
Verma said: “This (import duty hike) will also improve the revenue realisation for sugar mills and help them clear cane arrears of farmers at the earliest.”
Cane prices The Government could also lend a helping hand to growers by raising the fair and remunerative price (FRP) paid for sugarcane if it goes by the recommendations of the Commission for Agricultural Costs and Prices (CACP). A report submitted to the Food Ministry by CACP on Friday recommended a ₹10/quintal increase in the sugarcane FRP for the 2015-16 season (October-September). The FRP, which is the minimum price that cane farmers are guaranteed, is ₹220/quintal for the 2014-15 season. A higher FRP encourages more farmers to grow sugarcane.
“CACP has suggested sugarcane FRP of ₹230 a quintal for the 2015-16 season,” PTI quoted a senior CACP official as saying.
The FRP for sugarcane is fixed by the Centre but States can fix their own price — called the State Administered Price (SAP) — they want mills to pay cane growers. The SAP in Uttar Pradesh at around ₹280 a quintal has been widely criticised by mills in the State which have threatened to stop crushing operations from October, when the next season begins.
Sugar mills have been demanding implementation of the Rangarajan Committee recommendations across the country. The Rangarajan Committee has suggested a formula for payment to farmers according to which 70 per cent of the prices realised from sale of sugar, molasses, bagasse and press mud will be given to the farmers, while the rest will be retained as conversion cost, including all production costs, the mills.