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Harish Damodaran

Advance licence holders may be allowed to ship

New Delhi , July 5

White sugar export obligations against past duty-free imports of raw sugar under the advance license (AL) scheme will be exempted from the Directorate General of Foreign Trade's (DGFT) latest notification banning export of sugar from the country.

The notification, issued on Tuesday, has caused considerable confusion, especially for mills, which are making a killing now by exporting white (refined) sugar against ALs held by them.

Major importers

Between the 2002-03 and 2004-05 seasons (October-September), some 25 lakh tonnes (lt) of raw sugar were imported at nil duty against ALs. The major importers included Sakthi Sugars (around four lt), Thiru Arooran Sugars (3.5 lt), Shree Renuka Sugars (3.5-4 lt), EID Parry (2.5-3 lt) and Dhampur Sugar (1.5 lt).

Re-export obligations

The AL scheme requires mills to re-export one tonne of white sugar for every 1.05 tonne of raw sugar imported within 36 months of the license being issued.

So far, 7-8 lt have been shipped out, leaving an outstanding obligation of 15-16 lt.

At current prices of roughly $430 a tonne free-on-board (f.o.b), southern mills are effectively realising Rs 18.5-19 a kg on exports, which is a rupee more than on domestic sale.

This is a far cry from the scene a year back when ex-factory realisations on export, at Rs 11-12, were way below the Rs 16-17 a kg on local sales.

Thus, from a position where mills were rolling over export obligations by forking out penalties, today they are going whole hog in discharging the same.

In fact, till a recent ban imposed on third-party exports against ALs, these licenses were even fetching an informal secondary market premium. But the DGFT notification banning all sugar exports till March 31, 2007 — barring the 20,000 tonnes "preferential quota" to the European Union (EU) and the US through the Indian Sugar Exim Corporation (ISEC) — has raised a question mark on future shipments by AL holders.

The notification specifies that exports will not be permitted "against irrevocable Letters of Credit opened on or after 22.6.2006".

"The Government has no intention to stop sugar exports against ALs, since these are obligations to be statutorily discharged and have been factored in by the parties while contracting duty-free imports. The DGFT will issue a separate corrigendum within the next couple of days clarifying that the ban does not extend to AL holders," a top Commerce Ministry official told Business Line.

Govt export `releases'

It is another story though that there is a general ban on sugar exports as it is. At present, the Government makes `releases' for export only to ISEC (against the EU/US preferential quota) and to mills against ALs. In addition, ISEC and the State Trading Corporation (STC) have been allowed to export 1.5 lt each. Of this, ISEC has shipped out almost its entire quota, while STC, it is learnt, has decided against issuing any tenders.

"We don't understand the purpose behind this latest so-called ban. It looks as though the Government is just trying to show that it is serious about controlling inflation," industry sources noted.

More Stories on : Agricultural Policy | Sugar | Exports & Imports

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