The Hindu Business Line : Mills favour raw sugar imports by actual users

Industry & Economy - Exports & Imports
Agri-Biz & Commodities - Sugar

Mills favour raw sugar imports by actual users — Shipments into the country top 1 lakh t

Harish Damodaran
K.R. Srivats

New Delhi , March 24

THE National Federation of Cooperative Sugar Factories Ltd (NFCSFL) is `not averse' to duty-free import of raw sugar, provided it is undertaken by the mills themselves under the actual user condition. This is broadly in line with the position of the Indian Sugar Mills' Association (ISMA), which represents private sector factories.

"There is a massive shortage of cane available for crushing this season. Our mills in Maharashtra alone will be able to crush only 290-300 lakh tonnes this season, against 534 lakh tonnes during 2002-03 (October-September). Duty-free import of raw sugar will help the factories to utilise their capacities better," the Managing Director of NFCSFL, Mr Vinay Kumar, told Business Line.

Both raw as well as white sugar now attract a basic customs duty of 60 per cent and a countervailing duty of Rs 850 per tonne, making imports unattractive in the normal course. But these duties are not applicable on raw sugar imported under the Advance Licence (AL) or Duty-Free Replenishment Certificate (DFRC) schemes.

"We want the duty-free raw sugar import facility to be utilised only by the industry and not traders. The objective should be to enable mills to run viably rather than allowing traders to make a killing," Mr Kumar added.

Under the AL scheme, raw sugar imports are subject to the actual user condition, with the licence holders also obliged to export white sugar re-processed from the imported material. Entry 52 of the standard input-output norm (SION) permits duty-free import of 1.05 tonnes of raw sugar against a corresponding future obligation to export one tonne of white sugar.

On the other hand, the DFRC scheme allows imports on a post-facto basis, i.e., after exports have taken place. Further, the DFRC licence, which has a normal validity period of 18 months, is transferable and can be sold to third parties, including traders, for a consideration. Using this facility, many South-based mills, including Sakthi Sugars, Shree Renuka Sugars, Thiru Arooran Sugars and Bannari Amman Sugars, have imported over one lakh tonnes of raw sugar from Brazil, Australia and Thailand against their past exports of white sugar. All these imports - some of which are still continuing - have been against DFRC licences issued prior to November 29, 2002.

But in its public notice dated November 29, 2002, the Directorate-General of Foreign Trade placed a prior import condition on all new DFRC licences issued under entry 52 of SION. Mills can, therefore, no longer replenish the white sugar exported by them by importing raw sugar against new DFRC licences and reprocessing the same to white sugar. This has made the DFRC licences virtually the same as AL, except that the latter are not transferable.

"The public notice was issued keeping in view the glut situation prevailing at that time. As exports were seen as a way to reduce the huge inventories, the Government, then, rightly imposed the prior import condition, so that export of white sugar was not followed by import, leading to a replenishment of the stocks," the Director-General of ISMA, Mr S.L. Jain noted.

But things, according to him, have changed markedly in the last 3-4 months. Sugar production is expected to dip to 155-160 lakh tonnes during the current season, from the record 201.45 lakh tonnes level of 2002-03. While the new season had begun with inventories of around 110 lakh tonnes with the mills, the closing stocks would be only 85-90 lakh tonnes, assuming domestic consumption of 180 lakh tonnes and no exports. During the 2001-02 and 2002-03 seasons, exports amounted to 10 lakh tonnes and 17.5 lakh tonnes respectively.

"Having built new markets such as Malaysia, Indonesia, Yemen and Iraq during the last 2-3 years, there is a need to continue with exports without this causing large-scale depletion in stocks. The Government should allow mills to import raw sugar against exports already undertaken, as was the case till November 29, 2002. But this should be subject to actual user condition to limit the transferability of the DFRC licences only between mills and not allow them to be used by traders," Mr Jain added.

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