Sugar may remain cheaper with no likely change in import duty.

NEW DELHI: Sugar prices are likely to remain subdued for the next few months as cheap imports of processed and raw sugar continue with the government not in favour of raising the import duty from 10%. "We don't think there will be any change in the import duty structure of sugar.

Cheap imports and ample supply will keep prices in check," said a food ministry official. Industry bodies such as India Sugar Mills Association (ISMA) and UP Sugar Mills Association have been lobbying for raising the import duty from 10% to 60%. Cheap imported sugar has dragged the prices down by Rs 300 a quintal in the last few months, putting pressure on the local mills.

"When there is excess production, why is the government promoting imports? The cheap import will distort prices and harm the domestic industry," said Abinash Verma, director general, ISMA. According to industry estimates, the country is likely to produce 24 million tonne, leaving 1.5 million tonne in excess after meeting the domestic demand of 22.5 million tonne.

Last year, the production was 26 million tonne. Despite the estimated surplus output, overseas purchases of raw sugar for re-export and sale in the local market have gone up to 700,000 tonne since October 1, which is more than the combined imports in the previous two years.

"If government doesn't levy higher duty, the imports will leave the industry in trouble. The average production cost is around Rs 36,000 a tonne while the market price is hovering around Rs 32,000-33,000 a tonne, handing over a net loss of Rs 4000 a tonne," said a UP-based sugar mill owner.

Before 2009, there was an import duty of 60% on sugar to check imports. It was later abolished to boost domestic supplies in view of the production drop in the 2008-09 and 2009-10 sugar years. The country then imported about six million tonne of sugar to meet the shortfall. "Subsequently, the zero duty regime continued till mid-July last year when the government imposed a 10% duty on sugar to discourage imports in view of excess production," the official said.

Source : economictimes.indiatimes.com