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NEW DELHI (Commoditiescontrol) – The government of India is all set to tame price hike of sugar. As a measure to curb the prices, import duty on sugar, presently at 40 percent on refined sugar, is expected to be lowered. To know the implications and impact of a cut in import duty on sugar and understand the situation better commoditiescontrol asked Mr. Tarun Sawhney, President, Indian Sugar Mills Association (ISMA) over certain issues related to sugar market. Here under is his response:
What will be the immediate impact on sugar prices in domestic market if import duty on sugar is withdrawn?
The impact will be devastating as prices will fall dramatically and immediately. Demand will collapse and the meagre pipeline that exists today will extinguish. The point is that such a move can have such a severe impact without a grain of sugar being imported. If imports were to happen, the physical sale will further cement the above scenario. Of course, sugarcane arrears would mount yet again.
Is it viable to import sugar when the white sugar is already ruling around $485/tonne in the international market? Even prices may soar in coming days amid weak production estimate?
Why do we need to import sugar when there is enough sugar in the country for the next two years? The production domestically is sufficient to meet demand. When there is no physical shortage, why should be subsidising international sugar producers and foreign farmers when our own millers and farmers will suffer.
The domestic price of sugar in India is one of the lowest in the world. At a figure of $485 per tonne imports can happen! With respect of ’soaring’ domestic prices, my specific point would be that (a) ’soaring’ means establishing new highs, whereas 5 years ago we had prices much higher than these existing levels domestically, (b) if the retail price is a concern, the government can first withdraw the Rs.1 per kg additional cess, and (c) if the nation were to adopt a price sharing formula our farmers would benefit directly from any sugar price increase.
What should be the ex-mill rates when sugar mills feel comfortable to pay cane dues? What should be the retail price bracket?
At ISMA we believe the average ex-mill price of Rs 36,000 per tonne is comfortable to pay sugarcane dues, repay SEFASU loans to the central government, repay debt from last year which was taken by mills to clear sugarcane price, reduce the overall debt overhang of the industry which has risen from Rs. 11,000 crore in 2010 to over Rs. 51,000 crore in 2016, and lastly to complete timely repair and maintenance which has also been neglected for the past few years. Regarding retail prices at this ex-factory level, it should be no higher than Rs.41-42 per kg, and Rs.1 per kg lower if the additional cess is removed.
(By Commoditiescontrol Bureau; +91-22-40015533)
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