New Delhi, Aug. 22: The government today hiked the import duty on raw and refined sugar to 25 per cent from 15 per cent, a move that could raise sugar prices but would come as a huge relief to the cash-starved mills.
According to a notification by the Central Board of Excise and Customs, the higher duty will also apply to bulk consumers importing raw sugar.
The higher duty will make imports unviable, but will help the mills — struggling with lower prices and higher stocks — to clear dues worth around Rs 6,800 crore they owe to the cane farmers.
India has been importing sugar in small quantities, taking advantage of the lower global prices.
The Indian Sugar Mills Association (Isma) welcomed the decision as it would improve the cash flow of the mills.
“We welcome the decision. At current global prices and rupee-dollar exchange rate, this increase in duty will check all sugar imports, which will certainly improve the domestic market sentiments,” Isma director-general Avinash Verma said.
The food ministry had recommended a hike to 40 per cent. “However, the finance ministry has hiked the duty marginally, considering inflationary concerns and to give some relief to domestic millers,” a senior food ministry official said.
At present, domestic prices are stable in the range of Rs 34-40 per kg because of surplus stocks, according to consumer affairs ministry data.
After a meeting with both mill owners and farmers last week, food minister Ram Vilas Paswan had said the import duty on sugar could be raised to protect mills if they cleared the cane arrears of farmers.
“We are ready to raise the import tax, allow ethanol blending to 10 per cent, give some soft loans and export incentives for raw sugar but mills need to assure us that they will clear farmers’ dues,” Paswan told reporters.
Sugar mills are facing a cash crunch as domestic prices have slipped below the cost of production, hurting their profits.
Mills in Uttar Pradesh, the second-biggest producer in the country, owe farmers Rs 5,300 crore.
While the central government fixes a fair and remunerative price (FRP) for sugarcane, state governments are free to determine the price they want the mills to pay to the farmers for the cane.
Mills in the state have decided to suspend operations during the next season, starting October 1, 2014, saying they are unable to pay the higher price set by the state government.