The Hindu Business Line : Sugar import norms tightened

IN a major setback for importers of raw sugar, the Commerce Ministry has tightened the standard input output norm (SION) for such imports at zero duty against advance licences (AL). Henceforth, duty-free import of only 1.05 tonnes of raw sugar would be permitted against ALs for export of every tonne of white sugar.

This is as against the existing norm that allowed import of up to 1.2 tonnes of raw sugar under the AL route for every tonne of white sugar exported. In a public notice issued on Friday, the Directorate-General of Foreign Trade (DGFT) has also stipulated that from now on, ``export of white sugar shall be permitted only after import of raw sugar''.

The DGFT's directive comes as a blow to companies such as the Coimbatore-based Sakthi Sugars Ltd. and Shree Renuka Sugars Ltd, Belgaum (Karnataka). So far, roughly 50,000 tonnes of imported raw sugar have landed in the country during the current fiscal, with Sakhti Sugar accounting for 35,700 tonnes and Renuka Sugars another 11,000 tonnes.

The imports have been made against the white sugar already exported by these companies. Sakthi Sugars alone had shipped out an estimated 2.38 lakh tonnes of white sugar during the 2000-01 and 2001-02 crushing seasons. These exports were effected at ex-factory realisation levels of below Rs 10 per kg, as against the average production cost of Rs 12-12.50 per kg.

To recoup the losses incurred in the course of exporting white sugar, the companies have subsequently resorted to import of raw sugar from countries such as Brazil for reprocessing into white sugar and disposing of the latter in the domestic market. The main benefit accruing from these transactions has been the considerable savings in inventory holding cost. Besides, the companies have sought to take advantage of the prevailing low international prices of raw sugar, rendering it cost effective to import this sugar and refine the same to white sugar for selling in the domestic market, especially in the deficient, high realisation eastern zone.

However, the entire exercise would not be viable but for the AL scheme and the allegedly `liberal' SION notified for raw sugar imports. Both raw as well as white sugar attract a basic customs duty of 60 per cent and a countervailing duty of Rs 850 per tonne, which makes imports unattractive in normal circumstances.

But raw sugar imported under the AL or Duty Free Replenishment Certificate (DFRC) scheme for reprocessing into white sugar is exempted from these duties.

Further, while previously only 1.05 tonnes of duty-free raw sugar could be imported against export of each tonne of white sugar, the revision of SION (entry 52) carried out in May 2000 made it possible to import up to 1.2 tonnes of raw sugar against export of one tonne of white sugar.

What the DGFT has done now is to restore the SION to the 1.05 tonne norm prevailing prior to May 2000, which reduces the quantity of raw sugar that can be imported to allow for losses during refining and conversion into white sugar. Moreover, it has also ruled that companies would henceforth have to first import the raw sugar against ALs and subsequently export the processed sugar. This means companies such as Sakthi Sugars can no longer import raw sugar against white sugar exports already resorted by them.

DGFT has also mandated that raw sugar imports under SION entry 52 would now pertain to sugar, whose sucrose content in dry state, by weight, corresponds to ``a polarimeter reading of less than 95 per cent but not less than 98.5 per cent''.

For raw sugar not covered within this polarimeter range, exporters will have to approach DGFT or the licensing authority concerned who will have the discretion to grant or renew the AL.

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