FM's no to Barnala
Hike in import duty on sugar

NEW DELHI, Nov 20 (PTI) — Finance Minister Yashwant Sinha has shot down the Food Ministry’s proposal to hike sugar import duty, saying any such move would be inflationary and not advisable.

"I have had the matter examined...It has not been found feasible to agree to the proposal for increasing customs duty on sugar as suggested in your letter," Mr Sinha said in a reply to the Food Minister, Mr Surjit Singh Barnala’s proposal to hike import duty on sugar to 40 per cent.

Domestic industry has been demanding protection against cheaper imports, including that from Pakistan, but Mr Sinha said raising of import duty would disturb price stability of sugar.

Mr Barnala, in his letter on October 13, made available to PTI, recommended that the duty be raised from the current level of five per cent basic customs duty and Rs 850 per tonne countervailing duty to curb large-scale imports of the commodity.

Defending his decision to not raise import duty on sugar, Mr Sinha said opening stocks of 45 lakh tonnes for the current sugar year (October 1998-September 1999) was the lowest in past four years and levy stocks were negative.

"This may cause industry to indulge in speculative price escalation. Thus, it appears that we must keep the import option open at least till the stock position improves,"Mr Sinha said.

Forwarding the Food Ministry proposal, Mr Barnala had said a hike in sugar import duty was essential to provide a level playing field to the Indian sugar industy and to prevent financial losses to Indian farmers.

"Without such action, it would not be possible for the domestic sugar industry to make timely payment for sugarcane prices to the farmers," he said.

Mr Sinha said total sugar imports of 7.36 lakh tonne during October-September 1997-98 constituted only 5.7 per cent of the domestic production and hardly 5 per cent of the total domestic consumption.

It was too insignificant to make any impact on domestic prices, he said.

Domestic sugar price had remained steady for nearly a year, the Finance Minister said, adding that "had there been excessive imports at a dumped price as is made out by the manufacturing industry, this would have been reflected in a fall in domestic prices".

The imports had prevented a speculative rise in sugar prices, that too at a time when prices of articles like edible oil, pulses and vegetables were rising.

He said as compared to the annual domestic consumption of 142 lakh tonne, sugar production during 1996-97 and 1997-98 was 129 lakh tonne and 127.5 lakh tonne respectively.

Mr Barnala said in his letter that during October-March 1997-98, over eight lakh tonne of sugar had been imported in the country, resulting in softening of the domestic wholesale prices.

"It is feared that unless there is an immediate intervention from the government, the domestic sugar industry will be forced to sell Indian sugar at uneconomic levels which is likely to result in accumulation of cane price arrears to the farmers," he said.

Further, the financial condition of the sugar industry in the country was not particularly good and due to this reason, fresh investment was not coming into the sector.

"It would, therefore, not be in the interest of the economy if the domestic sugar prices are unduly depressed as this would adversely affect future capacity creation in the sugar sector," he said.

The Food Minister also said sufficient sugar stocks were available to take care of the domestic need.

"Imports are, therefore, only a burden," he added.

During the current season, there were expectations of a higher crop, he said, adding that there would be no difficulty in maintaining sugar supply at stable prices.

He also pointed out during the festival season there was no increase in the retail price of sugar for the consumers.

Mr Barnala said the global situation of sugar market had changed radically in the past few months with international prices plunging to very low levels of about $ 200 per tonne.

"At these low prices imported sugar is placing our domestic sugar units at a major disadvantage," he said.

The Indian Sugar Mills Association (ISMA) and the National Federation of Cooperative Sugar Factories Ltd had demanded that the import duty on sugar be hiked to 150 per cent to "ward off the crisis looming large over sugar horizon".

The associations warned the dumping price war would compel 45 million sugarcane farmers to switch to unremunerative crops and damage the Rs 20,000 crore sugar industry.

India had been allowing duty-free import of sugar till April until the government imposed the customs and countervailing duty.

Sugar imports have been rising mainly on account of increased shipments from Brazil and Pakistan.

At least 16.5 lakh tonne has been registered for imports and already 10 lakh tonne has arrived.

Industry claims that there had been a foreign exchange outgo of Rs 1,400 crore on account of sugar imports between September 1997 and october this year.

Mr Barnala told reporters yesterday that a fresh proposal to hike sugar import duty would be sent to Cabinet soon.