Centre discusses sugar production with mill associations

Government is expected to double sugar import duty to check all unnecessary imports

Centre discusses sugar production with mill associations

The Department of Food and Public Distribution, Government of India held a meeting with Indian Sugar Mills Association (ISMA) and National Federation of Cooperative Sugar Factories (NFCSF) on Friday to discuss the current situation of sugar in the country.

It was noted that sugar prices have fallen by over 10% since October 2017. But it was not reflective of the fundamentals. Even though sugar production in October to December 2017 this year was higher to last year, the sugar stocks on December 31, 2017, this season of around 85 lakh tonnes was substantially lower to that of last year of 99 lakh tonnes on December 31, 2016. Therefore, the closing balance on September 30, 2018 will be one of the lowest ever and as tight as last season of around 40 lakh tonnes.

It was agreed that there was unrealistic talk about 2018-19 production, whereas not even about 10 to 15% of the sugarcane for harvesting then has been planted. Even though with better rainfall in Western and Southern States, the sugarcane sowing may improve, it was accepted that it is totally premature to even guess a figure about next season’s production. In fact, the sugar production can get adversely affected if the rainfall from June to September 2018, is not good. Therefore, July 2018 will be a better time to have any preliminary idea about 2018-19 production, and not earlier.

Nevertheless, Food and Public Distribution Ministry officials assured that if there is a surplus in next season, 2018-19, appropriate timely action would surely be taken with regard to policies to ensure that the surplus, if any, is disposed off in time and in the best manner as deemed appropriate. The officials pointed out that in the last three years, the Government has taken various steps, including giving concessional loans, encouraging exports, incentivising ethanol production to reduce surplus sugar and, therefore, everyone felt that as and when required, the Government will certainly take immediate appropriate decisions on time.

Since the sugar production and demand in current season is very balanced and the closing balance will still remain tight at just around 40 lakh tonnes at the end of the season, there is no scope of any exports in this season. Therefore, reduction in the export duty may not make much sense now.

About the subsidies being given by Pakistan Government, it was noted that currently it is not viable to import from Pakistan. One could get a sense that if Pakistan imports do become viable, or if any contracts start taking place for importing sugar from Pakistan, especially if State of Sindh notifies any subsidy, the Government of India is willing to increase the import duty adequately to check any such imports. It was highlighted that as per Indian Customs Tariff Act, the sugar import duty can be raised to 100% within a couple of days. The Government would consider increasing import duty to check all unnecessary imports, and give full comfort to the market that no imports will happen.

Regarding need of exporting the surplus, if any, in 2018-19 sugar season, Bangladesh and Sri Lanka governments are being approached for extending preferential duties under South Asian Free Trade Area (SAFTA) and treaty amongst SAARC (South Asian Association for Regional Cooperation) nations. These two neighbouring countries together import around 30 lakh tonnes annually, which will be sufficient to absorb all the surplus if any, next year. It was agreed that there is enough time for the Government to held discussions and negotiations, since the surplus, if any, would come up only after November 2018, and there is no concern about the surplus till then.

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