NEW DELHI: The government has raised the import duty on sugar to 25% from 15% to help sugar mills, which are struggling to clear cane arrears due to low prices and excess stock.

Higher import duty will force refiners to purchase from domestic mills, which collectively owe sugarcane farmers close Rs 9,000 crore.
A notification issued by the Central Board of Excise and Customs on Friday said duty on both raw and white (refined) sugar has been raised to 25%. The higher duty will also be applicable to bulk consumers who import raw sugar, the government said.

India is the world’s largest consumer of sugar. As on July 31, over 660,000 tonnes of raw sugar was being imported into the country. The industry has estimated that another 151,000 tonnes of sugar will have been imported by end-August. Industry body Indian Sugar Mills Association (ISMA) welcomed the move saying it will improve revenue realisation and help sugar mills clear cane arrears at the earliest.

“At the current prevailing global prices of sugar and rupee-dollar exchange rate, the move to increase the import duty to 25% will make sugar imports into India unviable. This will check unnecessary imports of cheaper sugar into the domestic market,” said Abinash Verma, director general, ISMA.

However, sugar mills in Uttar Pradesh, which account for 61% of the total cane arrears, have said they will go ahead with their plans of shutting down operations. Mills in the state have been demanding linking of cane prices with sugar prices, as is the case in Maharashtra and Karnataka.

A week ago, Food Minister Ram Vilas Paswan had said the ministry had recommended a 40% increase in import duty— a long-standing demand of domestic sugar mills which sees it as a buffer against imports, in case global prices fall.

The industry said low domestic prices had made imports unviable. Ravi Gupta, vice-president of Renuka Sugars, said the move may positively impact domestic sentiment but not change ythe supply-demand balance. “There have been no imports for domestic consumption this sugar season. The cost price for white sugar imports in Rs 37,000 per tonne after duty and handling costs at port, which makes sugar unviable for imports,” he said.

Citing a higher domestic production of 25.14 million tonnes this season (October 2013- September 2014) against an annual demand of 23 million tonnes, sugar mills had requested a curb on imports in order to safeguard their domestic market.