July 31, 2009 / 9:14 AM / 10 years ago

Govt extends duty-free raw and white sugar imports

NEW DELHI (Reuters) – The government has extended its scheme to allow duty-free raw sugar imports until March and white sugar imports up to November, Farm Minister Sharad Pawar said on Friday, confirming what sources said earlier this week.

A worker carries a sack of sugar at a food warehouse in Mumbai July 11, 2008. REUTERS/Arko Datta/Files

The move is likely to prop up already high sugar futures prices in New York and London on prospects of large imports by the world’s top consumer of the sweetener.

India has seen sugarcane planted area contract for the second successive season due to low cane prices last year, and weak monsoon rains since June are also hampering production.

In February India allowed mills to import tax-free raw sugar with a condition that an equal quantity of whites should be exported within three years.

In April the government waived the requirement that imports of raw sugar had to be re-exported up to July 31, and asked state-run trading firms State Trading Corp of India Ltd, MMTC Ltd and PEC to import up to 1 million tonnes of whites before July 31.

Pawar said his government had also allowed private firms and more state-run firms, which he did not name, to import whites at zero duty. He added that raw sugar imports, earlier allowed only by mills, would now be opened to private trade also.

“It is expected that with these decisions, domestic availability of sugar could get further augmented and sugar prices in the country would remain at reasonable levels,” he told parliament.

Even as sugarcanes shortages mount, sugar production in India, the world’s top consumer and the biggest producer after Brazil, is expected to fall substantially.

Pawar said India was expected to produce 15.0-15.5 million tonnes of sugar in the year to September, down from 26.3 million tonnes a year ago.

Ajeet Kumar, an analyst in India, said the decision was unlikely to ease domestic prices.

Analysts said local prices were unlikely to fall as international prices were high. Front-month London white sugar futures are at around $494 a tonne, just $5 off a record high hit in 2006.

“Prices will come down only when the government announces extra subsidies on imports or LIFFE prices will come under $400 per tonne, that seems impossible in near to medium term,” Ajeet Kumar, research analyst at SMC Global Securities, said.

(Additional reporting by Ratnajyoti Dutta and Lewa Paduomuan)

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