The Hindu Business Line : Sugar, edible oil sectors feel let down by Budget

One is unsure if the Budget proposals would stoke inflation; but what is certain is that there are no specific or focused provisions to fight inflation.

G. Chandrashekhar

Singapore, Feb. 29 Far from any supportive measure, the latest proposals of the Union Budget are perceived as harsh on the commodity trade. Those in the business of edible oil and sugar as also participants in the derivatives market had expected some favourable treatment.

Edible oil importers and traders are disappointed that the Finance Minister did not think it appropriate to reduce the rate of customs duty on imported vegetable oil. Currently, the basic rate of customs duty on crude palm oil is 45 per cent and on soyabean oil 40 per cent.

There was widespread expectation within the industry of a duty cut in view of rising international and domestic prices, and the need to contain further price rise. At present, import prices are in excess of $1,100 a tonne. Consumers are paying dearly. The hopes of lower edible oil prices have been belied.

In anticipation of a duty cut, many exporters had held back their import documents from submitting to the customs department. They would now have to complete the formality, however disappointing it might be.

Sugar: Another commodity sector that expected a major policy announcement is the sugar sector. Industry representatives were keen that the Government announced total decontrol.

Currently, there is a 10 per cent levy on sugar production by mills and sales are subject a free-sale quota announced by the Government.

These are seen as vestiges of the control-raj of the yore. That’s not all. Commodity exchanges such as the National Commodity and Derivatives Exchange had sought re-listing of wheat and pulses contracts.

These were delisted a year ago as a result of political uproar against sharply rising prices.

Even the market regulator Forward Markets Commission had been talking about the need to withdraw the ban and recommence trade in these delisted items.

That is not to be, at this point of time.

Unrealistic expectation

It must however be stated that the expectations of the sugar industry (total decontrol) and of the exchanges (relisting of delisted commodities) from the Union Budget were unrealistic. The Budget is after all an annual statement of Government income and expenditure and fiscal proposals (changes in taxes and duties).

It is another matter that in recent years, many Finance Ministers have taken the Budget beyond fiscal measures and used it to announce policies. Yet, the budget is not the medium to announce policies that have little fiscal implication.

Market participants and sundry analysts of the commodity market have expressed disappointment over certain proposals in the Union Budget, particularly the levy of Commodity Transaction Tax without any speculative profit/loss set-off provision.

One is unsure if the Budget proposals would stoke inflation; but what is certain is that there are no specific or focused provisions to fight inflation. Inflation hurts the poor the hardest; and yet, there is nothing tangible, except a reference to strengthening of the public distribution system.

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