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M.R. Subramani

Chennai , May 22

IS the party over for raw sugar imports? This question is worrying a section of the sugar industry in the country following a change in the Foreign Trade Policy. However, another section feels there is nothing to worry due to an additional insertion made in the policy last month.

According to sources, a new clause has been added in para 4.1.5 of the policy. Earlier, the policy said advance licence and/or materials imported was/were not transferable even after export obligation is met. "Now, the change says the licencee has the option to dispose of the product manufactured out of duty-free inputs once the obligation is completed."

Analysts say this would mean that sugar refined from imported raw sugar could not be sold in the domestic market without fulfilling export obligation. If it is done, then it is seen as contravention of the policy and could invite penal action.

Late last year, the Centre had permitted sugar mills to sell sugar refined from imported raw sugar in the domestic market due to tight supply. Then, it gave the mills 24 months time to export one tonne of white sugar for every 1.5 tonne of raw sugar imported. Nearly 11 lakh tonnes of raw sugar have been imported since the beginning of the current crop year (October 2004-September 2005).

"Another 2.3 lakh tonnes are scheduled to arrive at various ports in the country. The change in the policy has now put a question mark over these imports," sources said. This includes about 40,000 tonnes contracted by Renuka Sugars, over 80,00 tonnes by NCS sugars and over 20,000 tonnes by Cargill.

However, Mr Vinay Kumar, Managing Director, National Federation of Cooperative Sugar Factories Ltd, told Business Line that some mills had raised fears over the change.

"We don't think there is any cause for worry. We have asked the Centre for clarification," he said.

"We think sugar refined from imported raw sugar may not be subjected under the general policy until September. This is because we were given exemption as a special case," Mr Kumar said.

"The policy change could have a bullish effect on sugar prices in the country as domestic supply could be affected," the sources said.

Duty-free raw sugar imports were allowed under advance licence scheme (ALS) for processing and re-export as sugarcane production during 2003-04 was hit by drought in Maharashtra, Tamil Nadu and Karnataka.

ALS requires the licence holder to export a produce processed from an imported product. Another scheme - Duty Free Replenishment Scheme - that allowed import of raw sugar after export of white sugar has been curbed with a prior import condition.

"If fears over the policy change are true, then there is no economic sense in importing raw sugar and then re-exporting it as white sugar even if factories are located near port," the sources said.

Currently, spot raw sugar is quoted at $190 a tonne f.o.b, while white sugar is ruling at $266 f.o.b.

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