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OUR BUREAU
August 23: Subdued as they are, domestic sugar prices have slumped further last week. In the international markets, the situation is no different, prices are hovering around $250 per tonne as against $350 per tonne in early January this year in the London market.
August 23: Subdued as they are, domestic sugar prices have slumped further last week. In the international markets, the situation is no different, prices are hovering around $250 per tonne as against $350 per tonne in early January this year in the London market.
Given this situation and increasing availability, sugar prices are set to decline further at least till the year end, if not thereafter. On Wednesday, the government announced 850,000 tonnes free sale sugar quota for September 1998 to meet the festive demand for the commodity.
The demand is said to be 50,000 tonnes higher than the previous month, and more than 100,000 tonnes compared to last year.
The same day (Wednesday), sugar prices declined sharply on the Mumbai wholesale market as a result of the government's decision to release additional quota of free-sale sugar. The S-30 (small grade) declined sharply by Rs 14-Rs 15 per quintal to Rs 1,431-Rs 1,485 per quintal, while the M-30 (medium grade) was quoted weak at Rs 1,460-Rs 1,530 per quintal. Last August, the prices were ranging around Rs 1,520-Rs 1,550 levels.
During the year, there has been minor fluctuations, but the overall price scenario remained sluggish in the wake of heavy imports. An estimated 13 lakh tonnes of sugar is said to have been contracted by Indian importers. Of the 7.5 lakh tonnes of sugar that have been imported till mid-August, five lakh tonnes are estimated to be from Pakistan. The five per cent import duty (plus countervailing duty) imposed in April this year has had little impact. Domestic sugar industry led by the All India Sugar Manufacturers' Association (AISMA), had demanded a levy of 20 per cent import duty. Little wonder therefore, these developments has once again forced the industry to demand further levy of 15 per cent import duty.
"The import duty is just a drop in the ocean of sugar which helps foreign countries, including Pakistan, to earn foreign exchange at the cost of our own industry", said Shailesh Bajaj, president, AISMA. "We don't expect such treatment from a government which claims to be Swadeshi but helps Videshi countries."
According to Bajaj, under the World Trade Organisation agreements, India is free to levy an import duty of 150 per cent. ``Governments of sugar exporting countries are protecting their own farmers and industry, why not Indian government?'', asks Bajaj. European Union levies an import duty of 200 per cent, followed by South Africa (124 per cent), Thailand (104 per cent), Brazil (55 per cent) and Pakistan 36 per cent.
However, a shaky BJP government has declined to accept industry's demand to raise the import tariff walls further and restrict sugar availability through fresh import barrier when the festivals are round the corner, fearing this will result in higher prices. "We have assured the government officials that there will be no price rise, if the import barrier is raised to around 25 per cent," Bajaj said. "From our on-going meeting with top government officials, there appears a positive response to raise the import duty further."
Pakistan, one of the leading sugar exporters in this region, was fast to react to India's import barrier. Soon after India announcing five per cent import duty (plus CVD), it announced sops for its sugar exporters which saw around over five lakh tonnes Pakistani sugar flooding the Indian markets. This is likely to continue as Pakistan, facing international sanctions after the bomb blasts in June, would want maximum possible foreign exchange (through exports) to meet its own financial requirements.
According to Bajaj, we have a huge stock of over 10 million tonnes of sugar in the country. By October 1, 1998, (the new sugar season) the carryover stock will be over five million tonnes. Next sugar year (October 1998 to September 1999) we expect a bumper sugar production of over 15 million tonnes. "Given this situation, there is ample sugar within the country and little reason for the government to worry about any price rise", Bajaj said.
In the global markets, Russia, a major sugar importer, after its recent devaluation of rouble, imposed 78 per cent import duty on raw sugar and 48 per cent on white sugar last week. The move is to discourage global sugar exporters from dumping their goods in the country. Earlier there were marginal import duties. This has cast a heavy cloud over export prospects of various leading sugar exporters like Brazil and Australia among others.
Backed by good sugarcane production, majority of the sugar exporting countries are said to be currently flooded with good sugar production waiting to offload their produce at the earliest. Given the financial crisis facing the south east Asian countries and even Russia, demand for sugar in these countries will be restricted to bare minimum. This situation makes India a good dumping ground for foreign sugar exporters, which if not restricted, would see prices go down further, hitting interests of cane growers and sugar barons.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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