Will clarify DGFT notification on exports under advance licence scheme

Harish Damodaran

The advance licence scheme obliges mills to re-export one tonne of white (refined) sugar for every 1.05 tonnes of raw sugar imported within 36 months of the licence being issued.

New Delhi, July 11

The ambiguity surrounding white sugar exports by mills against their past duty-free imports of raw sugar under the advance licence (AL) scheme is set to be resolved at the next meeting of the Cabinet Committee on Prices (CCP).

The CCP, likely to meet by Thursday, will clarify that the Directorate-General of Foreign Trade's (DGFT) July 4 notification banning export of sugar till March 31, 2007 would not cover re-export obligations of mills under the AL scheme.

Once that happens, the DGFT will issue a separate notification stating that the ban (enforced after the CCP's meeting of June 22) does not apply to AL holders, highly placed sources told

Business Line

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The AL scheme obliges mills to re-export one tonne of white (refined) sugar for every 1.05 tonnes of raw sugar imported within 36 months of the licence being issued.

Imports

During the 2003-04 season (October-September), 2,18,750 tonnes of raw sugar were imported, which rose to 20,28,221 tonnes in 2004-05. The white sugar export obligation on the aggregate imports of 22.47 lakh tonnes (lt), thus, works out to roughly 21.4 lt.

Exports

As per information compiled from various Customs authorities, exports during the ongoing 2005-06 season has so far totalled 8.81 lt. Besides, there are contracts for another 1.71 lt awaiting shipment, which still leaves an outstanding export obligation of around 10.9 lt, valued at $500 million at current international prices.

With ex-factory realisations on exports being nearly Re 1 per kg higher than on domestic sales, southern mills particularly have been busy dispatching shipments.

But following the July 4 notification specifying that exports will not be permitted "against irrevocable letters of credit opened on or after 22/6/2006," the process has come to a standstill.

"We are not able to export as the Sugar Directorate has stopped issuing release orders after July 4. They say that no sugar will be released for exports pending the DGFT's clarification. Even against past release orders, the Customs authorities are refusing to accept the bills of lading filed by us. Many shipments are now stuck at the ports," a South-based miller said.

Interestingly, in an earlier notification dated June 27, pertaining to a six-month export ban on pulses, the DGFT had explicitly stated that it "shall not apply to imports already effected against advance licences/authorisations issued prior to the date of issue of this notification."

This is in contrast to the vague position with regard to sugar exports against ALs, that too when the prices of pulses have risen much more than sugar in recent months.

(This article was published in the Business Line print edition dated July 12, 2006)
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