The Food Ministry is expected to come out with a notification this week allowing import of 3 lakh tons raw sugar at 25 percent duty for the southern states. Currently, the import of sugar attracts 50 percent customs duty. The decision has been taken to augment domestic supplies as the stocks are expected to fall sharply as the limits on mills will leave the opening stock for next season at less than 4 million tons. The government had allowed import of 5 lakh tons at zero duty.
Sugar perhaps is the only commodity that has an export duty of 20 percent and then also an import duty of 50 percent. There are stock limits on quantity that can be held by the dealer and now mills, too. The government from time to time has been advising the industry to offload more in the market to keep prices down. There has been advice to advance crushing. And, that’s not all, the government also doesn’t want the prices to cross much higher than Rs 40/kg.
It was in 2013 , after being the only industry left under government control, that the sector was partially decontrolled by allowing mills to sell in the open market removing the obligation to supply 10 percent of their sugar at subsidized rates.
The industry has seen a lot of positives, too, as the arrears have come down to the lowest in many years after the government put the 14-day penalty clause. Sugar prices are above the cost of production; remember, the mills have seen prices in the range to Rs 19–23/kg, too, while tackling low sugar prices and rising FRP prices.
Sugar is one of the commodities that even as it’s listed on the derivatives exchange has not been able to attract participation and volumes. The prices have been stationery between Rs 36-38/ kg ex-mill for the past 7–8 months and the retail prices have been near Rs 5-6 higher. The supply demand fundamentals haven’t worked for the commodity.
The challenges are far from over for the sector as the market will now need to look at the 2018-19 crops as well as the GST impact on ethanol and molasses and then the anti-sugar campaign which already has near 22 countries participating in it to cut sugar in food.