Sometime at the end of February and on March 1 two shiploads of molasses from Pakistan arrived at Haldia and Budge carrying about 11,500 tonnes of molasses. The first consignment of 5,500 tonnes was imported by IFB Agro Ltd, which manufactures alcohol. The second one was for a Chennai-based molasses trading organisation, IMC Ltd (formerly The Indian Molasses Co Ltd). Both the companies used to procure their required molasses from domestic sources but, for several reasons, have switched over to the Pakistan variety this year.

Molasses is a thick liquid left after the removal of sucrose from the mother liquor in the sugar manufacturing process. It is used primarily for manufacturing ethyl alcohol and fodder.

Recently, Pakistan shook the domestic sugar industry by exporting lakhs of tonnes of sugar tothe eastern parts of India at much lower prices. The Indian sugar industry, which was for so long enjoying sheer monopoly in domestic sugar markets, especially for the largest selling medium-course variety, lobbied hard with the Government, urging it to increase the import duty on the commodity.

Under pressure, the Government increased it first to 20 per cent and then to 25 per cent in the budget. Moreover, it imposed a 10 per cent surcharge on all imports. Therefore, sugar imports will now attract a total of 27.5 per cent customs duty and a countervailing duty (CVD) of Rs 850 per tonne. This has forced the Pakistan sugar manufacturers to quit and turn to molasses.

Pakistan's inroads into the Indian molasses market is worrying for the sugar industry here as the production of molasses in the country, which is about 75 lakh tonnes per year, is enough to meet the demand.

In 1994-95 some quantities of sugar and molasses were indeed imported when production in the country was severely hit by drought. Butnow, the discriminatory pricing of molasses by different sugar manufacturing states such as Maharashtra, Uttar Pradesh, Bihar and Andhra Pradesh, along with restrictions on movements of molasses from state to state are the chief reasons for companies in eastern India to switch over to overseas sources, according to an insider in IMC. Although the molasses being imported from Pakistan were much cheaper than the Indian variety, the price benefit was not the sole reason, he said.

The sugar industry too has admitted this. The finance executive of Balrampur Chini Mills Ltd, Kishore Shah, said that the distribution controls on molasses have compelled the consumers in deficit states such as West Bengal to import the commodity from abroad.

Seeking protection for the domestic producers of molasses, Shah said that the Government should make concerted efforts to allow free movements of molasses in order to avoid unnecessary imports.

Molasses, at present is priced at around $15 per tonne on FOB basis abroad, whilein India, the prices vary widely among different producing states. In Maharashtra and the southern states a quintal is quoted around Rs 40 plus a central excise duty of Rs 50, while in Uttar Pradesh and Bihar it is between Rs 100 and Rs 110 per quintal excluding excise duty. In contrast, in the deficit states such as West Bengal the same is quoted at around Rs 315 per quintal owing to restrictions on movements, according to market circles.

Earlier, trading of molasses was entirely controlled by the Centre but it decontrolled the same in 1993-94 and left the matter to the sugar-producing states.