Ministers to consider tax on sugar imports.

A panel of ministers will consider whether to re-impose a tax on white sugar imports next week as millers fear a flood of cheap imports, official sources said on Thursday.

India, the world's top sugar consumer, last year withdrew a 60 percent import tax on white, or refined, sugar as output fell 44 percent.

The measure turned the country into a big importer and helped New York raw sugar futures surge to their highest level in 29 years in February.

But with output expected to bounce back and international prices having halved since early February, millers fear imports would be cheaper than local production and that mills would not be able to pay good rates to cane farmers, who have expanded cultivation.

The panel, headed by Finance Minister Pranab Mukherjee, is scheduled to meet on June 10 to review the sugar situation in the world's top producer behind Brazil, a food ministry official told Reuters.

The official said the panel would also consider the impact of an import tax on food price inflation, which has remained at about 16 percent in recent months and triggered protests in the country.

"The import tax could be lower than last year," he said.

INDUSTRY SEES 40% TAX

Farm Minister Sharad Pawar said India may make a decision in about a week on re-imposing the tax on imports, a Press Trust of India report in the Financial Express newspaper said on Thursday.

Prices fell in local markets by about 30 percent in the last four months, the report said.

High sugar prices helped Indian farmers negotiate record cane prices last year, which has encouraged them to expand the area under cane cultivation by 5 percent.

Industry officials said the country could impose an import tax of at least 40 percent on white sugar to arrest a sharp fall in local prices of the sweetener.

"Imported sugar sells for much less than our production cost," said M.N. Rao, deputy director general of the Indian Sugar Mills Association.

Imposing the duty again would help mills pay a good price to cane farmers and encourage higher cultivation, industry officials said.

"At least a 40 percent duty will give some respite," Rao said, adding the millers would not mind the earlier duty rate of 60 percent.

Analysts say India could slap an import tax on sugar before the start of its 2010/11 season in October to protect farmers and millers from a flood of imports as global prices crash.

On Wednesday, London August white sugar futures dropped $15.10, or 3.2 percent, at $456.80 per tonne on long liquidation amid improved global sugar production outlook.

The global sugar market will see a surplus of about 5 million tonnes this year, 30 percent more than previously expected, even as consumption rises, though India is unlikely to export any excess sugar soon, industry sources said.

Source :- moneycontrol.com/news