• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Srinivasan

The French firm's main aim of establishing the subsidiary is to purchase sugar directly from the various factories to consolidate quantities from supplying mills and achieve better quality and logistical control.

New Delhi , Oct. 11

THE Foreign Investment Promotion Board (FIPB) has cleared a French trading company's proposal for importing raw sugar into India and processing it for export to third countries, overruling the objections of the Ministry of Food, sources privy to the decision of FIPB meeting told Business Line here.

The board gave approval to the proposal of the French trading major, Sucden (Sucres Et Denrees Sa), to set up a 100 per cent wholly owned subsidiary in India.

Sucden is one of the largest buyers of Indian sugar with an average annual volume of about 1.50 lakh tonnes in the past two years valued about $70 million.

The main aim of establishing the subsidiary is to purchase sugar directly from the various sugar factories to consolidate quantities from different supplying mills and achieve better quality and logistical control on the supplies.

The Ministry of Food in the meeting opposed this project as the second objective of importing raw sugar for processing into white sugar for purposes of re-exporting to countries (against which India has locational and logistic advantages) it felt has the potential to harm the economics of the sugar industry.

Overruling the objection, the FIPB cleared the proposal with a proviso that the project is subject to final approval by the Finance Minister, Mr Jaswant Singh.

Industry sources said at a time when the Government has been exporting sugar with subsidy and other incentives to get over the glut caused by successive best harvests in recent past, it was rather strange that FIPB should accord approval to the setting up of a subsidiary which would only import raw sugar into the India for conversion into white sugar for re-export.

They added that the French company's Indian subsidiary would bring in only Rs 15 lakh by way of foreign investment but proposes to borrow $5,00,000 under the external commercial borrowing to meet the project cost.

The sources recalled that when the DGFT allowed import of raw sugar against duty free replenishment certificate (DFRC) on fulfilment of export commitment, the industry objected to that as the merchant-exporter or manufacturer-exporter for the import of inputs used in the manufacture of goods were dumping even white sugar into the country, misusing the scheme, as the difference between raw sugar and white sugar was too thin to be recognised by Customs officials.

It was only at the direction of the then Central Board of Excise and Customs (CBEC) Chairman, Mr M.K. Zutshi, that the authorities in the Commerce Ministry woke up to the misuse and stopped this facility in the interests of indigenous sugar industry after it made a spate of representations and remonstrations.

The fallout of the proposal in terms of injuring the domestic sugar industry's brittle cost calculations need to be carefully weighed before the Finance Minister okays this type of foreign direct investment, the sources said.

Article E-Mail :: Comment :: Syndication

Stories in this Section
TEC finds no fault with Reliance 'roaming'

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line