The surge in sugar prices over the past four days is being directly related to moves by a section in the sugar industry wanting the reintroduction of import duty on sugar. Over the past few days, sugar prices in the wholesale market have risen by Rs 200 per quintal as the market anticipates the imposition of import duty.
The union government had lifted import duties on sugar in an effort to cool down domestic retail prices which had breached the Rs 50-per-kg mark. Importers have contracted for about 40 lakh tonnes of sugar this year, with close to 15 lakh tonnes to be delivered by December.
Should the government accede to the demand for the imposition of a 30% import duty on sugar, it will not be viable for importers to ferry sugar paying a duty of Rs 9 per kg. This may result in another spike in sugar prices.
“The request from the food and agriculture ministry has already been made to the finance ministry for levying the import duty on sugar. We would like government to delay imposing this duty till June 2011, wait for sugar production in the situation in the country to stabilise, build a buffer stock and then impose the import duty,” said Kanhaiyalal Gidwani, the Congress party spokesman in Maharashtra.
Balrampur Chini Mills director and chief financial officer Kishor Shah said, “The imposition of duty will not only check excessive import of cheap white sugar from Brazil but will also help stabilise sugar prices in India. Prices are now hovering around Rs 29 per kg and are still far below the cost of production which is Rs 36 per kg.”
Should the government announce import duties, these will come into force with immediate effect. So, sugar consignments could be diverted on the high seas to other markets or contracts may be cancelled where loading has not happened.
Narendra Murkumbi, vice chairman and managing director, Shree Renuka Sugars, said, “With domestic production in the current season hovering around 18.5 million tonne against earlier estimates of 15-16 million tonnes, import of white sugar at zero duty is no longer justified.”
The wide discrepancy between estimates and actual production believed to have caused the spike, leading the government to free imports.
A case in point is Maharashtra which is expected to produce 60 lakh tonnes sugar this year, a jump from earlier projections of around 47 lakh tonnes. Even agriculture minister Sharad Pawar has been critical of the misleading projections.
The all-India production of sugar is expected to be 180 lakh tonnes, with mills already having produced 170 lakh tonnes. To this has to be added the 40 lakh tonnes of imported sugar, of which 15 lakh tonnes is yet to be delivered.
“The central government should re-instate the import duty at the same rate as it was two years back,” said OP Dhanuka, CMD, Riga Sugar Co.
The managing director of a cooperative mill in Maharashtra explained, “In UP, millers want imported sugar to be priced higher than the Rs 2,350 per ton at 9.5% recovery, which is their cost of production. In Maharashtra, we have a higher recovery, averaging 11.5% so we are slightly better off even after paying Rs 2300 per tonne.
Source : economictimes.indiatimes.com