The food ministry is pitching for an increase in import duty on sugar to 40% from 25% to stop cheaper inflows fromoverseas and halt a slide in domestic prices of the sweetener so that mills’ capacity to clear cane arrears improves.
After a meeting with representatives of various farmers’ bodies, food minister Ram Vilas Paswan said he would write to finance minister Arun Jaitley suggesting the hike in the import duty, which was raised to 25% from 15% in August last year.
The meeting was convened to discuss how to help clear dues (worth a record R19,244 crore as of March 31) owed by mills for cane purchases. It was also attended by Union ministers Nitin Gadkari and Dharmendra Pradhan.
“We will take all measures to protect farmers’ interest… There were 14 farmers’ organisations present in the meeting. They made five key demands, including complete ban on sugar imports or hike in the import duty and creation of bufferstock of three million tonne,” Paswan said.
Farmers’ other demands — including enhanced focus on ethanol blending withpetrol, government control on sugar sales, direct assistance to farmers instead of mills — would be discussed on Thursday in a meeting with chief ministers of 13 cane producing states, he added.
Paswan, however, conceded that even at the 25% duty, not much of imports were taking place. But a miller said hiking the duty would improve sentiments in the market. “As long as a window is available to source sugar from abroad, domesticprices won’t recover. So a prohibitive duty of 40% will be the first step towards halting the crash in domestic sugar prices.”
Mills have been struggling to clear cane arrears as a crash in global sugar pricesand plentiful supplies in the domestic market following a surplus production for a fifth straight year through 2014-15 have caused a slide in domestic sweetenerrates, while cane prices were raised substantially by the authorities.
Ex-mill prices of sugar have fallen to R21-24/kg in the country, while the cost of production can go up to R36/kg, thanks to high prices of cane fixed by states like Uttar Pradesh. This year, however, has been extremely difficult for mills in even Maharashtra and Karnataka, as sugar prices were hovering around almost six-year lows. Banks have cut down on lending to the cash-starved sector for fears of a spurt in bad loans, further worsening the problem of mills.
The Centre earlier this year extended a subsidy of R4,000 per tonne of raw sugars up to 1.4 million tonnes to improve the cash-flow of the millers, but the outbound shipments have come to a halt due to a plunge in global prices. The Indian SugarMills Association has been demanding that the government give exports subsidy on white sweetener, create buffer stock of two million tonnes and also facilitate the restructuring of mills’ debt.