In a relief to millers beleaguered by higher cane prices and surplus stocks, the government Friday raised the import duty on sugar to 25 percent from 15 percent.According to a notification by the Central Board of Excise and Customs, import duty has been raised to 25 percent on raw sugar and refined or white sugar. The higher duty will also be applicable to bulk consumers who import raw sugar, the notification added. After a meeting with both millers and farmers last week, Food Minister Ram Vilas Paswan had said the import duty on sugar could be raised to protect mills if they clear farmers' cane arrears. "We are ready to raise the import tax, allow ethanol blending to 10 percent, give some soft loans and export incentives for raw sugar but mills need to assure us that they will clear farmers' dues," Paswan told reporters.Currently, domestic sugar prices are ruling in the range of Rs.34-40 per kg in view of surplus stocks, according to the Consumer Affairs Ministry. Prices fell below the cost of production in some states with the country producing surplus sugar for the fourth consecutive year. Mills in Uttar Pradesh are selling sugar at Rs.30.50 per kg, while the cost of production remains at Rs.37 per kg.
In June, Paswan had said import duty could be raised to 40 percent from 15 percent. "We welcome the decision. At current global prices and rupee-dollar exchange rate, this increase in duty will check all sugar imports, which will certainly improve the domestic market sentiments," said Abinash Verma, director general of Indian Sugar Mills Association (ISMA).Earlier this month, sugar mills in Uttar Pradesh threatened to suspend operations from the 2014-15 crushing season starting October unless the state government accedes to their demand to link the sugarcane price to the price of sugar.Mills in Uttar Pradesh, the second biggest producer in the country, owe farmers over Rs.5,000 crore, which they have not paid due to lower sugar prices. The close to 100 private sugar mills in UP have been at loggerheads with the state government, which makes sugar companies pay a premium to farmers over the cane price fixed by the Centre.
While the central government fixes a Fair and Remunerative Price (FRP) for sugarcane, state governments are free to determine the price they want sugar mills to pay to the farmers for cane.The mounting losses are affecting the very viability of the industry that contributes Rs.18,000 crore annually to the state exchequer."The credit ratings of sugar companies in Uttar Pradesh are falling and are much lower than those of firms in the west and south, making it difficult to get funds. We face major liquidity problems," said Gursimran Mann, managing director, Simbhaoli Sugars.