Decision on sugar import duty likely by month-end.

Having put off a key decision on white sugar import duty at Thursday’s empowered group of ministers (EGoM) , the Centre is likely to take up the proposal again by the end of the month after food and farm minister Sharad Pawar returns from his trip to the USA.

“The proposal could come up for a decision by end June,” an official told ET after the EGoM meeting. The possibility is that when it does, import duty hike may not be more than 20-25%.

This is viewed as a “moderate level” and there is a strong perception within a section of the food ministry that the government should move slowly since sugar stocks with the government could be lesser than two million tonnes in the crucial festival season starting September.

Key officials of the sugar department in the food ministry are understood to have met Mr Pawar in Mumbai after his surgery recently and convinced him that in view of the sensitivity of the issue (food inflation is still over 16.75%), a “rethink” was imperative. Sharp price hikes for sugar and pulses in the run-up to the festival season showed up in high food inflation figures last year.

Last week, a revised food ministry paper meant for the EGoM had suggested a higher import duty level of 40% as opposed to the earlier proposal of only 20-25%. However, compared to earlier, global sugar prices have firmed up and domestic prices are around Rs 2,000 a tonne lower than the landed price of imported sugar.

Consequently, traders have stopped contracting fresh import orders. In the event, the move to hike customs duty on imports is likely to be merely symbolic, having little real impact on consumer prices for sugar.

The decision to push for an import duty hike prior to the festival season, when domestic demand and prices peak, is therefore likely to be a measure mainly meant to boost sugar industry bottomlines for the whole year by keeping out possibly cheaper imports at the time.

Sugar mills earned Rs 10 per kg higher than the production price for the first six months of the year but prices plunged globally and domestically since February, slashing profits.

Meanwhile, yet another pending decision on ethanol prices for the much-vaunted ethanol blending programme (EBP), meant to boost sugar industry bottomlines, has acquired new dimensions with the petroleum ministry apparently telling EGoM head, finance minister Pranab Mukherjee, that since the market price of ethanol had now plunged to Rs 17 a litre, it would be unreasonable to expect OMCs to pay Rs 27 a litre for the commodity to sugar industries at present.

The chemicals and petrochemical department has so far been protesting over the price suggested by the EGoM, but yet to be endorsed by the Cabinet. The industry was told by the EGoM head earlier that it could import ethanol to meet its needs if it fell short after sugar companies supplied to the EBP programme.

The industry has been pushing for zero duty but Mr Mukherjee said at the EGoM’s last meeting that it was up to them to push for this separately should import prices be higher than Rs 27 a litre.

Source :- economictimes.indiatimes.com/Foreign-Trade