The Hindu Business Line : Food Ministry plans easing raw sugar imports

New Delhi, Jan. 12 The Centre is all set to relax duty-free imports of raw sugar against advance licences (AL) by allowing it on a ‘tonne-to-tonne’ basis till September 30.

According to highly-placed sources, the Food Ministry has drafted a note in this regard, which will be circulated among other Ministries (Commerce, Finance, etc) before being sent for the Union Cabinet’s approval.

Currently, mills can import raw sugar at zero duty against ALs only if they reprocess it into white (refined) sugar for exports within 24 months of the license being issued.

The proposal

What is proposed is an easing of this ‘grain-to-grain’ norm, so that the re-processed white sugar can be sold in the domestic market first. The re-export obligation – one tonne of white sugar for every 1.05 tonnes of raws imported – can be met separately on a ‘tonne-to-tonne’ basis. These could involve processing domestically sourced cane rather than the originally imported raws.

The Food Ministry note, the sources said, has also provided for deferment of existing white sugar re-export obligations (against past ALs) till the end of December.

“Effectively, it means mills will not be allowed to discharge their outstanding export obligations under the AL scheme, estimated now at around seven lakh tonnes (lt). The whole emphasis is on conserving whatever sugar is available, by liberalising imports and bottling up exports,” they pointed out.

The Centre had earlier, with effect from January 1, made sugar exports under open general licence conditional upon factories obtaining valid ‘release orders’ from the Directorate of Sugar.

Run-up to elections?

The Centre’s latest moves come in the context of a looming domestic shortage and hardening prices of sugar in the run-up to Parliament elections. With output for 2008-09 (October-September) variously estimated at 180-190 lt, along with opening stocks of 80-100 lt and consumption of 230 lt, the current season is expected to close with 30-60 lt, which will barely meet 2-3 months’ domestic requirement.

It is this shortage perception that has led to a firming of spot sugar prices by about Rs 1,500 a tonne over the last one month alone. And, it is also driving the Centre’s proposed move to permit duty-free raw sugar imports on a ‘tonne-to-tonne’ basis till the end of this season and restrict exports to the extent possible.

Imports viability

But how viable are raw sugar imports? Currently, the March No. 11 contract at the New York Intercontinental Exchange is quoting at about 12 cents a pound or $265 a tonne. Adding freight of $30 a tonne from Brazil would take the landed cost at Indian ports to roughly $295 or Rs 14,340 a tonne.

If one also factors in the costs at the port (Rs 750-1,000, inclusive of bagging), transport to factory (Rs 500-1,000 depending upon location) and conversion (Rs 1,500-2,000 depending on whether in-house baggase or costlier coal is used as fuel), the effective mill-gate price of the processed white sugar would be well above Rs 17,000 a tonne.

“This is less than the Rs 17,900-18,000 a tonne ex-factory price in Maharashtra. But then, any large-scale imports by India may drive up world prices as well, thereby changing the equation.

As of now, it looks as though imports would be viable only for coast-based factories and refineries, especially those catering to the deficit Kolkata and eastern region markets”, the sources said.

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