Ram Vilas Comes to the Aid of Sugar Mills, Kills Import Price Competition

In a large meeting attended by a galaxy of ministers and secretaries, it was decided that India will raise import duty on sugar to 40 percent from 15 percent, Government is trying to revive business the cash strapped mills which owe farmers around $1.84 billion, the Food Minister Ram Vilas Paswan said on Monday, 23 June.

The rise in duty to a steep 40 percent will mean that import will dry up. According to ABS database, Rs. 408.86 crs of sugar entered the country in April 2014. The duty hike will push up prices in India. It will make overseas purchases unviable for refiners in the world’s biggest consumer of the sweetener. Shipments from suppliers such as Brazil, Thailand and Pakistan will be hit.

Paswan also told reporters the subsidy on raw sugar exports would be extended until September. India increased the subsidy for raw sugar earlier this month to boost output and exports (Rs. 2679 crs of raw sugar was exported in 2013-14 compared to Rs. 3680 crs in 2012-13, according to ABS database).

But large-scale exports are unlikely in the short term, as most of this year’s raw sugar output has already been shipped.

India is likely to export more than 2 million tonnes of sugar in 2014/15 as the top consumer is set to produce a surplus of the both raw and refined sugar for the fifth straight year despite chances of reduced rainfall.

The government has also decided to raise the mandatory level for blending ethanol in gasoline to 10 percent from 5 percent, Paswan said. India has launched its ambitious ethanol blending programme in 2006, but oil companies have killed the proposal.

New Delhi is now trying to promote ethanol blending that could help it in reducing its current account deficit and also boost mills’ earnings. Indian mills produce ethanol from molasses, a by product of sugar production.

The government is also considering extending the duration of repayments of interest free loans made to mills against excise duty to five years from three years, Paswan said.

Cane Sugar Trade

	2012-13		2013-14
	(LT)*	(Rs. Crs)	(LT)*	(Rs. Crs)
Import	11.20	3084	8.67	2231
Export	26.97	8254	23.84	6873

*Lakh Tonnes

[Source: ABS Database and DGCIS Kolkata]