Sugar mills fear hit from imports.

NEW DELHI: The sugar industry has said it could notch up a whopping Rs 6,500 crore in losses if the Centre does not reimpose duties on cheap imports, making it difficult for the mills to pay sugarcane dues to farmers.

The projected high sugar output for the coming year has also added to concern as sugar prices could remain subdued. “The over Rs 1,000 crore in cane price arrears to farmers that UP mills have run up in the aftermath of sugar price plummeting will be chicken feed compared to these losses,” Sunil Kakria, MD, Mawana Sugars, told ET.

The government had removed duty on raw and white (refined) sugar following two consecutive years of low output. Bulk consumers of sugar can import duty-free up to April 1, 2011. Till date, the industry has imported 4.2 million tonnes of raw and white sugar.

Industry says because of the zero duty, Brazilian white sugar sells cheaper than domestic produce.

High import duties would discourage cheap imports and thereby help keep consumer prices relatively high. Retail sugar price in Delhi is about Rs 33/kg and Rs 27/kg in Mumbai. While this is a 30% drop compared to Rs 50/kg in January, it is still much higher than the Rs 17/kg sugar sold at in 2007-08.

Making matters worse are some projections from the US Department of Agriculture and Rabobank that the sugar output for the coming year could be as high as 25 million tonnes. The Centre’s estimate is just a million tonnes lower at 24 mt. For 2009-10, the estimates have been upped from 18.1 m tonnes earlier to 18.5 m tonnes.

Prices in international markets have shown a steep decline from $766/tonne in January to $486/tonne recently on the back of higher Brazilian and Indian 2009-10 season sugar projections.

“If sugar prices drop to Rs 22-23/kg on the back of high sugar supply, it could also jeopardise the interest of sugarcane farmers because cane price is normally 70% of ex-mill sugar prices,”an official from a UP-based sugar major added.

The Indian Sugar Mills Association (ISMA), the industry lobby, met in Delhi last week to discuss the issue of import duty. It could not reach as consensus on suggesting a 60% duty on imported raw and refined sugar as several mills insisted that duty re-imposition on white sugar be prioritised. Duty on raw sugar, it was decided, would be taken up subsequently.

Last week, food & consumer affairs minister Sharad Pawar signalled that government would use “protecting the sugarcane farmer’s interests” as the key excuse to impose import duty on sugar.

Most of the sugar majors including including Triveni Engineering and Bajaj Hindusthan posted losses in the January-March 2010 quarter.

Source : The Economic Times