The Government has hiked the import duty on sugar to 15 per cent from the present 10 per cent to curb cheaper inflow of the sweetener into the country.

The hike in duty may help stabilise sugar prices and in the process help millers to make cane payments, currently estimated at Rs 9,000 crore.

The Department of Revenue has issued a notification regarding the duty hike on raw and refined sugar imports, which has come into effect from Monday.

The latest move follows representations by sugar co-operatives and farmers to hike the import duty as a bearish trend in realisations has not only hurt the millers but also the cane payments to farmers.

Sugar co-operatives plea

Urging the Government to check imports under the open general licence (OGL), the sugar co-operatives had demanded the duty be hiked to 30 per cent.

The sugar co-operatives felt that the inflow of cheaper sugar from countries such as Brazil and Pakistan was influencing the domestic prices.

Sugar prices have been bearish since the beginning of the crushing season in October as millers have been off-loading stocks to pay off the cane dues to farmers.

Cheaper sugar under OGL

Further, the rising imports of cheaper sugar under OGL have crossed half-a-million tonne and are also influencing the prices, thereby affecting the realisations. Raw sugar imports under advance licensing for re-exports were estimated by the industry at around 1.2 million tonnes.

Millers blame the build-up in cane arrears to the high cost of production – driven by high cane prices and lower-than-expected realisations.

Since the beginning of the current season in October, sugar millers in UP have been losing about Rs 4-5 a kg as the ex-factory prices have been hovering around Rs 31-32 a kg, while the cost of production is estimated at Rs 36 a kg.

Cane arrears

Further, the recent de-control of sugar sales announced by the Centre has not helped the millers to clear up the cane dues as ample supplies in the market have kept the prices of sweetener for quite some time now.

The average ex-factory realisations in Maharashtra, which stood at Rs 3328 per quintal in October 2012 are now hovering a little over Rs 2,800 a quintal.

The increase in imports is despite the domestic output estimated at around 24.5 million tonnes against the demand for 22.5 mt.

According to industry estimates, the opening sugar balance for the next season starting October is pegged at around 8 million tonnes. The millers are unable to export the surplus sugar as international prices are ruling lower than domestic prices.

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