Move afoot to impose customs duty on sugar.

The food ministry is readying a revised proposal on customs duty hike on white sugar imports to put up before the empowered group of ministers (EGoM) on food.

This is despite apprehensions that the total stocks of sugar with the Centre at the start of the festival season, beginning September, could be lower than 2 million tonnes. The EGoM meeting is slated for June 10.

The proposal, apparently at the behest of food minister Sharad Pawar, is that a 40% import duty be imposed on sugar. An earlier proposal had suggested a “moderate” 20-25% duty. But notations by a ministry official had indicated that the government’s sugar stocks in October could be lower than two million tonnes, thereby indicating that the move was inadvisable at present.

“Such decisions can only be made on the basis on currently available data. But these do not support the urgency to hike duty now,” an official said on condition on anonymity.

Significantly, an official statement on sugarcane plantings has maintained that up to June 4, acreage has grown only 5% compared to the same period last year. That can hardly be considered a bumper crop, as is being suggested by the government (whose sugar output estimates have gone grossly wrong several times, leading to serious economic consequences) and other quarters.

According to official data, even up to May 28, area under sugarcane has gone up by only about two lakh hectares to 42.85 lakh hectares. In fact, doubts are being raised over the sugar output projections of 25 million-tonnes for the 2010-11 sugar-year.

Sugar prices shoot up during the festival season. In the last two consecutive years, sugar retail prices shot through the roof on account of output shortfall and had a cascading effect on other agri commodities such as food grain, thus spiking food inflation markedly. Since then, food inflation had consistently remained above 16%.

The urgency to push through the customs duty hike on imported white sugar is all the more inexplicable at this juncture since traders of late have stopped all fresh import contracts after global sugar prices started firming up.

Currently, import price, including incidental costs, comes to around Rs 2,000 per tonne higher than domestic price. The industry, however, has pegged total potential losses at an estimated Rs 12,000 crore if the Centre does not hike import duty on white sugar, currently at zero, before September when the new sugar season begins.

Source :- economictimes.indiatimes.com