The finance ministry is reviewing the import duty on sugar, which is currently under a duty-free regime.
Following a recommendation by the food ministry, the duty may be pegged at 15 per cent albeit with ad valorem of four per cent.
The duty on import was brought down to zero as an anti-inflationary measure in the beginning of this year and got extended beyond March 31.
“The situation is quite comfortable in the domestic market and the industry is exporting. In such a scenario, it really does not matter what is the import duty. But we are watching the situation and the zero duty regime comes to an end on June 30. There is a review and going by the recommendation, 15 per cent import duty is reasonable,” an official source said.
It is very unusual for any commodity to either attract zero duty regime or an import duty as high as 60 per cent . Therefore, 15 per cent import duty is reasonable but there may be ad valorem of four per cent, said sources.
The food ministry has been recommending 15-20 per cent import duty to the finance ministry since 2010. Ad valorem duties of customs are duties levied according to the value of goods and are usually expressed as percentages of value. Such duties are distinct from specific duties imposed on the commodity as such.
In the 2010-11 season (October-September), mills have already exported about one million tonnes to meet export obligations under the Advance Licence Scheme (ALS) and is in the process of shipping nearly 450,000 tonnes under Open General Licence (OGL).
India, the world’s second-largest producer and biggest consumer, is expected to produce 24.2 million tonnes (mt) in the 2010-11 season against 18.8 mt in the previous year.
The annual domestic demand is 22-22.5 mt.
Import duty on sugar was abolished in early 2009 to boost domestic supply. Before that, the import duty was 60 per cent. In 2008-09 and 2009-10 , the domestic output was lower than the demand at 14.7 mt and nearly 19 mt, respectively.
The country had to import about six million tonnes of sugar during these two seasons.
Owing to excess supply, the food and consumer affairs ministry has been easing the stock holding limit on sugar to improve market supplies and clear pipeline stocks.
In March, an empowered group of ministers had relaxed the limit on sugar to 500 tonnes per month from the earlier limit of 200 tonnes .
This was done as sugar production in the 2010-11 crop marketing season rose to almost 24.5 to 25 mt, while consumption was estimated to be around 22 mt.
The production in the coming crop season, which starts from October, is expected to be even more than this year. Stock holding limit is a control imposed by the government over the total supply of essential commodities in the open market.
