India ponders raising white sugar import duty.

Oct 10 (Reuters) - India is considering raising duties on white sugar imports but is unlikely to tinker with the existing rate on raw imports, two government sources said on Wednesday, hoping to protect domestic millers from cheap competition.

In addition, the move would reflect confidence that domestic supplies will be adequate for the world's top consumer despite lower output this year because of delayed monsoon rains.

"There is a case to increase the import duty on white sugar from the current 10 percent to avoid flooding of white sugar in the domestic market," said one of the sources close to the development.

India, the world's biggest producer after Brazil, imposes a 10 percent tax on all overseas purchases of the sweetener.

Expectations of lower output in 2012/13 led Indian mills to strike an import deal for 5,000 tonnes from western neighbour Pakistan, giving rise to speculation that the country could waive an import tax to boost local supplies.

But Food Minister K.V. Thomas said on Tuesday there was no urgent need to lower duties as supplies will exceed demand.

India is likely to produce 23.5-24 million tonnes in 2012/13, down from about 26 million tonnes in the previous year, Farm Minister Sharad Pawar said on Tuesday.

It should have 6 million tonnes of carry over stocks, according to the Indian Sugar Mills Associaton (ISMA), helping to cover annual demand of around 22-23 million tonnes.

The government sources said the strategy to retain the duty would help curb cheap raw imports, while any move to lower the tax would flood the market during the domestic crushing season.

"Cheaper imports would depress local sugar prices, might hit margins of mills, leading to delay in cane payments to farmers and eventually affecting our production. We do not want that," the second source said.

India has exported sugar in the last two seasons after a severe drought in 2009 forced it to turn to imports, sending global prices to 30-year highs.

The import duty for white sugar can be raised by the finance ministry by issuing a formal order as such a hike does not need any approval from the federal cabinet.

Source : in.reuters.com