Import Duty On Sugar Hiked From 15% To 40%

The new government has started to take slew of measures to revive the economy, one of them being for the benefit of the sugar sector. The sugar sector for a long time now has been has trapped and lack of government reforms has hampered its growth. The Modi government has announced to hike the import duty to 40% from 15%, which is a very good news for the sector as the imported sugar is hampering the market for domestic sales. According to the latest data by Indian Sugar Mills Association (ISMA), 6.60 lakh tons of sugar has already arrived at the ports and more 1.90 lakh tons of sugar will be arriving shortly. This year the production is in surplus and there exists no need for imported sugar, says the industry body. Now, this imported sugar has an import duty of 15%. But, from here on with the latest hike in import duty such a large quantity of exports are expected to be curbed and will increase the market for domestic sugar.
 
Maharashtra, Karnataka, coastal states of Tamil Nadu and Uttar Pradesh produce 80% of the total production in India. Out of these states with an exception of Uttar Pradesh all others need to export sugar. The total production of sugar in India stood at 239 lakh tons in the current sugar season (1st October 2013 – 15th May 2014) as compared to 247 lakh tons in the last season. This produce, according to ISMA, is enough to fulfil the domestic requirement and for exports.
 
Moreover, the government has also said that the sector will get and an additional interest free loan of Rs 4000 crore to repay the farmer’s dues which amounts to around Rs 11000 crore. With this move the farmers will get at least some of their dues from the sugar mills providing an incentive to them for production of sugar.

Previously, several export contracts which were finalised at the rate Rs 3300 per tonne of incentives were not getting executed because of which there was an oversupply of sugar in the domestic market. This along with additional imports affected the margins of the sugar manufacturers bringing the prices down. But, with this new government initiative to raise the import duty from 15% to 40% the import will reduce curbing the supply of sugar in the domestic market. Consequently, the sugar companies will benefit.

The opening balance as on 1st October 2013, for 2013-14 season was around 93 lakh tons it is expected that 19-20 lakh tons of sugar will get exported in the current season and the closing balance is expected to be 74 lakh tons.