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Harish Damodaran

DGFT's recent notification raises fresh doubts

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New Delhi Jan. 23 The flip-flop on the sugar export front continues. Nearly two weeks after the Union Cabinet approved a complete lifting of the ban on shipments, the Directorate-General of Foreign Trade (DGFT) has issued a notification raising fresh doubts on whether exports have really been freed or are subject to quantitative ceilings.

The notification, dated January 23, states that the prohibition on exports (imposed on July 4, 2006) shall not apply to export of sugar executed against valid release orders issued by the Directorate of Sugar in the Ministry of Consumer Affairs, Food and Public Distribution.

Till this point, there is no confusion because even in the free export regime prior to July 4, mills had to obtain the Directorate's permission (`release order') to move sugar from their factory gate for exports. The release orders — issued against bill of lading and other confirmatory shipping documents — were necessary to clear the goods without attracting excise duty, otherwise payable on domestic sales.

The rider, however, arises in the latter part of the notification, as per which exports are to be allowed only "up to the limits approved by the government, after which fresh approvals will be taken for further releases".

Contrary to decision

In other words, the Centre may now set a quantitative limit on sugar exports, contrary to the decision taken in the January 11 meeting of the Cabinet. The Finance Minister, Mr P. Chidambaram, had clearly said after the meeting that sugar exports would be put on the open general licence (OGL), while being regulated through the Food Ministry's release orders "as is the usual practice".

But the DGFT's latest notification suggests that the Centre (more so, the Finance Ministry) is still in two minds on freeing exports. Sources say that there was initially a plan to even specify a ceiling of 7.5 lakh tonnes in the notification, but it was dropped fearing adverse reaction.

Instead, the notification empowers the Centre to fix a limit on exports, while leaving the exact quantum open-ended as of now. That also raises the possibility of exporters being given permission on a first-come-first-serve basis.

The Finance Ministry's reservations on opening up sugar exports fully has been mainly due to the high weightage (3.62 per cent) of commodity in the official wholesale price index: more than that on cement (1.73), steel (3.2) or even diesel (2.18). The Rs 350-400 per quintal fall in ex-factory prices of sugar since the export ban has helped partially offset inflationary pressures in other primary commodities such as edible oils, pulses, wheat and milk.

During 2005-06 (April-March), the country exported 3,16,850 tonnes of sugar worth Rs 557.09 crore. In the current fiscal, these figures surged to 10,04,317 tonnes and Rs 2,119.68 crore within the first quarter, before the ban came into effect.

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Sugar export ban relaxed

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