On duty-free sugar imports and its impact on domestic industryDuty free imports is benefitting not onlythe multinationals but also sugar cane and sugar beet farmers in other countries at the cost of Indian farmers. Such imports is causing a havoc in the domestic market, for, this gives a profit margin of Rs 1.50-2 per kg to the importers. Taking advantage of the policy, several multi-national sugar trading houses like E.D.& F Man, Glencore, Louis Driffus, Cargil among others (having their outfits in India) are responsible for bulk of such imports.
It should be noted that the European Union, which is the principal exporter of white sugar, sells sugar in its country at about US $800 per tonne but dumps it into the Indian market at a CIF price varying between US $325 and US $350 per tonne. This dumping should be stopped forthwith by imposing an anti-subsidy duty and ultimately a countervailing duty atleast to the extent of local taxes prevailing in the country which amounts to 20 per cent.
On import duties levied by other countries
Some countries in the world have import duty at rates varyingbetween 40 to 50 per cent. US, Japan and the European Union levy import duty between 140-200 per cent to protect their local sugar industry. However, there seems to be change coming with new food minister SS Ramoowalia willing to take a fresh look at the proposal to curb excessive imports by imposing countervailing duty (CVD). The Government has not even considered it desirable to levy the special customs surcharge of 5 per cent on sugar, which is applicable to all commodities imported in to the country. This levy will not impact the poor whose sugar requirements are met by the public distribution system.
The industry would like to caution the government that a repeat of 1994-95 should not re-occur when two million tonnes sugar were imported in the country which ultimately created a havoc with the Indian sugar industry.
Imported sugar should be subjected to similar regulation on storage, sales and distribution as applicable to free sale sugar.
On purchase of free sugar to meet levydeficit
There is absolutely no justification for the government of allowing imports when the industry in totality is carrying huge stocks of free sugar in which it is incurring heavy storage charges and heavy interest burden. Since there was a shortfall of five lakh tonnes of sugar in levy account in 1996-97, the industry agreed to give a similar quantity to the government as loan from its free sugar account. However, since there is going to be a further shortage of eight lakh tonnes of levy sugar in the current year and as the country would be having an additional stock of free sugar to the tune of 2.3 million tonnes even on December 31,1998, we have requested the government to buy 13 lakh tonnes of sugar out of the above free stocks of the industry. This would still leave the industry with a surplus free stock to the tune of one million tonnes in December 1998.
For fixing a price for this sugar, the government should take the previous three months average free sugar selling price as it had donewhile creating a buffer stock of one million tonnes.
On SDF loan for cane development:
There are 100 applications from sugar factories (valued at around Rs 75 crore) pending with the food ministry for availing the sugar developing loan against the cane development fund. The Finance Ministry has yet not sanctioned this amount. Since the sowing season has already begun and will last only for three months, it is extremely imperative that the above amount is cleared by the finance ministry at the earliest.
On decontrol of sugar industry
India is the only country in the world where the partial control is existing and 40 per cent of the sugar production has to be given under PDS at much below the cost of production. With the liberalisation across the board in almost all industries, it is high time that the sugar industry is also removed from the shackles of controls immediately.
In case PDS sugar is distributed only to the poorer sections, its off-take would come down drasticallyfrom 4.7 million tonnes to 1.5 million tonnes of sugar annually. On current year's production estimate of 12million tonnes this would amount to hardly 12 per cent of the total production against 40 per cent sugar being supplied through PDS today.
In case of wheat, rice and kerosene oil which are distributed through the PDS, heavy subsidies are borne by the government. Presently sugar is being subsidised to the tune of Rs 700 crore annually and the above subsidy should atleast be continued.
Prospects of sugar exports from India
India has been a fair-weather exporter of sugar. South Africa (producing 2.5 million tonnes) exports over a million tonnes of sugar annually. India too can export 2-3 million tonnes of sugar annually provided the industry is decontrolled. This would swell the foreign exchange coffers by US $1 billion annually.
De-control will help steady increase in sugar production and make our exports competitive thus minimising fluctuations in the sugar output.
De-control willhelp minimises wasteful utilisation of sugarcane crop by gur and khandsari who lose 40 per cent of the recoverable sugar in the process. Over one million tonnes of sugar valued at Rs 1,300 crore is thus wasted annually.
On possibility of sugar futures in the forward market
Futures is in vogue these days. So,after decontrol, the government should now think about permitting sugar futures like in gur which is being traded through futures since the early 50s.
Expansion of capacity:
There are 440 sugar plants in India. No other country has as many sugar factories. Like in efficient sugar producing countries, we too need to consolidate smaller number of large-sized sugar plants to achieve economies of scale. But we still believe in increasing the number of sugar plants rather than the capacity of them. Though in India we have 7/8 sugar plants of 10,000 tonnes of cane crushing per day, in countries like Thailand, the average cane crushing capacity per day is10,000 tonnes. Incidentally, Thailand has the largest sugar plant in the world with 40,000 tonnes per day cane crushing capacity.
On sugar cane research and development
There is a need to link research work of various sugar research institutes with the industry. The cane marketing societies should be suspended forthwith specially in the Northern states such that the sugar factories could take up the cane development work to improve the yields and recovery percentage of sugarcane. The societies at best should act as watchdogs and not interfere with the sugar mills in harvesting sugarcane on maturity basis and also taking up other developmental activities.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
