"We have written letter to the Ministry of Consumer Affairs and the Prime Minister's Office (PMO) reiterating our demand to increase import duty on raw sugar to 60 per cent from the existing 40 per cent," said Abinash Verma, Director General, ISMA.
While the government has allowed 500,000 tonnes of raw sugar import on tariff rate quota (TRQ) basis which, the industry believes, has already been achieved. Due to a sharp fall in raw sugar prices globally, its import with even 40 per cent levy is viable. Taking advantage of the situation, many Indian refineries have imported huge quantity of raw sugar from Brazil.
A letter addressed to the Principal Secretary to the Prime Minister of India, ISMA said that over 295,000 tonnes of raw sugar imported into India between June 1 and 15 alone. Raw sugar prices in global markets at cents 12.50 / lb (pound) provides Rs 5 a kg margins for refineries in India.
Meanwhile, the government has raised the Fair and Remunerative Price of sugarcane by 11 per cent to Rs 255 a quintal for the crushing season 2017-18 (beginning October 2017) which is set to raise cost of sugar production proportionately.
Rating agency Icra estimates India's sugar production to rise by 16-20 per cent to around 23.5 - 24.5 million tonnes for crushing season 2017-18 compared to 20.3 million tonnes for the previous year. Earlier, industry had estimated output to surpass 26 million tonnes on forecast of normal monsoon this season.
"Despite increase in sugar production, the same would at best be at the same level as our estimate of consumption of around 24.5 million tonnes in SY2018. Thus, the low closing stock levels of sugar (which declined to around 4.5 million tonnes in SY2017 from 7.7 million tonnes in SY2016) in the domestic market are likely to support the sugar prices in the near term. Any downside to sugar prices from the current levels is likely to be driven by the allowance of a further import of duty free sugar, which appears unlikely at this moment," said Sabyasachi Majumdar, Senior Vice President & Group Head, Icra Ratings.