Financial Daily from THE HINDU group of publications
Saturday, Aug 24, 2002
Agri-Biz & Commodities
Govt to blame for raw sugar imports
MUMBAI, Aug. 23
THE domestic sugar industry is in a state of shocked inaction for several months now, with the perceived threat from imminent decontrol and continuing overhang of stocks. Mills are forever looking at opportunities to improve their topline and bottomline but the battle with the market forces seems to be a losing one.
Extra-ordinary problems demand extra-ordinary solutions; and some resourceful mills have hit upon the brilliant idea of duty-free raw sugar import under advance licensing for executing export orders. Indeed, the legitimacy of the operation is beyond question.
In this dynamic marketplace, whoever gets a brilliant business idea first has to move fast and make money. This is what some sugar mills have done. They hit upon the idea and are implementing it, all within the permissible limits of law.
The Sugar Development Council members are, however, upset over raw sugar imports. They think such imports are suicidal and should be stopped forthwith. They have no reason to be so unduly concerned. The only regret they should have is that the idea did not occur to any one of them. What seems to rankle the council members is that a private sector mill has gone ahead with the import.
There can be no two opinions about the fact that the country is carrying burdensome stocks of sugar and that the industry is in the throes of sickness. Obviously, every single cost-saving device and every single business-opportunity will have to be exploited. After all, this is what business is all about.
It is obvious that the Government has goofed up in formulating fool-proof advance licensing policy and input-output norms. There is embarrassment in Government circles that someone has brought to light the lacuna in the policy.
While it may be a valid defence for importers to assert that the transaction import of raw sugar and export of white sugar was strictly as per the Exim policy, a few questions remain.
Is the imported raw material used strictly and exclusively for export production or is it disposed of in the local market and indigenous raw material used for export production? Are value-addition norms strictly followed?
For export products that have significant or dominant import content, should all the export benefits that are by implication intended for indigenous products be granted?
Should excess sugar, if any, available after processing and after satisfying the input-output norms be allowed to be sold in the domestic market, and in that case should it attract customs duty?
If one went by the example of diamond industry import of raw and export of polished diamonds the case of raw sugar import is unassailable.
However, what differentiates sugar from diamond is the fact that the country is a major producer of the former, there is a large overhang of stocks, the industry is still controlled and is slowly turning sick.
It is clear, no one but the policy makers deserve to bear the blame, if any, for the present controversy over raw sugar imports.
here is nothing to get worked up about because so long as loopholes exist in the policy, they will be exploited. Those in business will remember the scams relating to value-based advance licensing scheme not long ago.
Sugar cooperatives in Maharashtra are concerned over raw sugar imports because the State produces more than a third of national output, but consumes less than half of its own production.
Their concern is no doubt justified but mills in the State have to learn to market their production outside the State as the country inexorably moves towards a free market, and not indulge in nitpicking.
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