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To maintain sweetness in the country’s sugar industry and retail market, the Central Government has taken a very important and far-reaching decision. In order to keep the prices under control in the domestic market and to ensure that there is no shortage of supply in the market even after the festive season, the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry has made a major change in the rules of Tariff Rate Quota i.e. TRQ. Under this new order, the country’s refineries have got direct permission to import raw sugar without any custom duty till December 31. This strategic move by the government will not only put a brake on the possible rise in sugar prices domestically, but will also help large refining units located near ports to fully utilize their production capacity.
According to the official notification issued by DGFT, duty-free import of fixed quantity of raw sugar under the tariff rate quota system will now be completely valid till December 31. Under the previously implemented provisions, importers and millers were faced with a number of deadlines and administrative requirements, which left the consignments at risk of getting stuck at ports. Now by making the rules flexible, it has been made clear that the units which have been allotted quota under TRQ can bring raw sugar to India without paying any basic custom duty till the end of the year. Senior officials of the Commerce Ministry say that this step has been taken after reviewing the availability of raw materials in the global market and India’s domestic stock, so that adequate buffer can be kept ready before any unexpected crisis.
India is one of the largest sugar consumers in the world and demand for the sweetener reaches its peak every year during the festive season. However, despite festive demand, sugar is consumed heavily in weddings and winter food processing industries. In such a situation, if the supply in the open market falters even a little, it has a direct impact on the retail prices. This latest decision of the government has given a clear signal to the market that there will be no sugar crisis in the country. This will also completely curb the possibilities of speculation and hoarding in wholesale markets. As refineries import raw material at cheaper rates and convert it into processed sugar, prices in the retail market will remain stable in the normal range of Rs 38 to Rs 44 per kg.
This policy change has come as a big relief for the huge refining plants located in coastal states like Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu. These refineries mainly process raw sugar imported from major producing countries like Brazil and Thailand and supply it to the domestic market or export it after adding value to it. There was increasing operational pressure on these units due to fluctuations in global logistics costs and shipping freight in the last few months. Now with the duty-free window open till December 31, these units will be able to plan their supply cycle better. Mill operators say that by getting duty exemption, their input costs will reduce and they will be able to work at full capacity, which will also give impetus to employment and industrial activities at the local level.
Another and very important aspect of this decision is the country’s Ethanol Blending Program (EBP). The Government of India is rapidly moving towards the ambitious target of blending 20 percent ethanol in petrol. A large portion of domestic sugar mills are diverting sugarcane juice and B-heavy molasses directly to ethanol production. As the country’s major domestic mills divert more cane towards green energy, there is a risk of limited production of food grade sugar. The government has tried to strike a balance by opening the import of raw sugar under TRQ. On the one hand, this will continue the use of sugarcane for green fuel and on the other hand, there will be no shortage of sugar in the kitchens of the common people. Sugarcane farmers of Uttar Pradesh and Maharashtra will also benefit from this as the financial liquidity of the mills will remain intact, due to which their sugarcane dues can be paid on time.
The outlook for sugar production globally depends largely on Brazil’s weather and Thailand’s crops. The futures price of sugar in the international markets has seen several fluctuations in recent times. At such a time, giving a fixed window till December 31 under TRQ by India is a well-thought-out diplomatic and economic step. Indian importers can now take advantage of favorable global prices and sign contracts immediately. Further, the Government of India has also ensured that the consignments to be imported are only based on those standards which do not harm the interests of the domestic industry. The process of refining imported raw sugar and adding it to the domestic supply chain has now been freed from paper formalities and brought under single-window monitoring.
In the coming months, due to winter and wedding season, there is going to be huge demand from confectioners, bakeries, packaged food companies and soft drink manufacturers. If the price of sugar increases, it directly impacts the cost of production in all these sectors, causing the common man to lose money. Duty-free imports will provide relief to wholesale suppliers and wholesale rates will remain under control. When rates remain stable in the wholesale market, the direct benefit goes to the middle class shopping at general grocery stores. Market experts believe that this policy will also provide strong support to the efforts of the Reserve Bank of India and the government in keeping the inflation rate (CPI) under control.