New Delhi, March 25 The Food Ministry has forwarded a proposal to slash import duty on both white as well as raw sugar to zero for the Union Cabinet’s consideration.
‘Pawar busy’
The proposal has already received the Election Commission’s nod, according to highly placed officials. “We don’t know whether it would be taken up by the Cabinet immediately because the Minister, Mr Sharad Pawar, is busy in election campaign and is not scheduled to be in Delhi till the third week of April,” they said.
Currently, imports of both whites and raws attract 60 per cent basic customs duty. At the same time, mills are allowed to import raw sugar at zero duty against advance licences (AL) subject to fulfilling an obligation to re-export one tonne of white (refined) sugar for every 1.05 tonnes of raws shipped into the country.
Last month, the Centre permitted mills to sell the whites re-processed from the imported raws under AL scheme in the domestic market. The re-export obligation (within the stipulated 24 months of the license being issued) can be met separately by processing the whites from domestically sourced cane.
No re-export obligation
“The proposal now under consideration is to allow duty-free raw sugar imports against actual user condition for a limited period sans any re-export obligation,” the officials said, without specifying what this “limited period” would be.
For white sugar, the duty-free import facility would be restricted to only four parastatals – MMTC, STC, PEC and Nafed – and subject to a cap of 10 lakh tonnes (lt), the officials added.
Currently, the May raw sugar contract (No. 11) at New York is trading at around 12.75 cents a pound. Since this quote is for 96 degree polarisation and the raws that are imported from Brazil are of polarisation above 99 per cent, there is a 4.05 per cent ‘pol premium’ payable, taking the price to 13.27 cents a pound or $292 a tonne.
Current landed costs
If, to this, one adds freight from Brazil — which is around $40 a tonne now, after ruling as low as $20-25 in December-January — the landed cost comes to $332 or about Rs 16,875 a tonne at current exchange rates.
A mill in peninsular India importing these raws would incur port handling and transport charges of about Rs 1,500 and another Rs 2,000 as cost of refining. The ex-factory cost of the processed sugar would, then, be Rs 20,375 a tonne, which is more than the Rs 18,500 being realised by factories in Maharashtra and Rs 19,250 by southern mills.
Unviable
“As of now, imports are not viable even at zero duty. In fact, after the decision taken to impose stock-holding limits on traders, domestic realisations have fallen by about Rs 2,000 a tonne. As a result, hardly any raw imports against ALs have been contracted in the past one month”, industry sources pointed out.
So far, raw sugar import contracts of roughly 10 lt have been entered. “We don’t see any more contracts happening now that there is this proposal to import duty-free without attracting any re-export obligation. If the rupee strengthens in the medium term, who would want to risk importing at the present exchange rate and re-export later for a lower value?,” they added.
At $393 a tonne London daily price, import of whites are also seen to be unviable. If one were to account for the Thai premium of $25 over the London prices plus freight cost of $25, the landed cost in India will be about $443 or Rs 22,500 a tonne.
Final cost
Adding discharge charges of Rs 500 and similar costs on wholesale distribution, plus Rs 850 countervailing duty and Rs 1,000 sales tax, will take the final cost well above Rs 25 a kg. “Import of whites can happen only on Government account, for which the parastatals have to be compensated for any losses incurred,” the sources noted.
Source : Business Line