Sugar prices could increase marginally following the government’s decision to hike the import duty on the sweetener to 40 per cent from the existing 15 per cent as part of its efforts to revive the sector.
The decision was taken at a meeting convened by Food Minister Ram Vilas Paswan and attended by Transport Minister Nitin Gadkari, Commerce Minister Nirmala Sitharaman, Principal Secretary to the prime minister Nripendra Mishra, Cabinet Secretary Ajit Seth and others.
It was also decided to provide additional interest-free loans up to Rs 4,400 crore to sugar mills, provided they used the money to pay arrears to cane growers.
In December, the Centre approved Rs 6,600 crore interest-free loans to sugar mills to clear the Rs 11,000 crore arrears they owe the farmers.
The government also decided to extend the subsidy on raw sugar exports until September. The government had increased the subsidy for raw sugar earlier this month to boost output and exports. The sugar industry has been facing a cash crunch as the domestic prices of the sweetener are less than the cost of production.
The government also decided to increase the level of blending ethanol with petrol from the current five per cent to 10 per cent. However, for these decisions to come into effect, the sugar mills have to give a guarantee of clearing arrears to sugarcane farmers at the earliest.
“We don't have any problems in announcing these incentives formally if millers are ready to make payments. If they give assurance today, we will announce incentives today itself,” Paswan said.
The Indian Sugar Mills Association (ISMA) welcomed the government’s decisions and said the move would improve cash flow to the mills.
ISMA Director-General Avinash Verma said the hike in import duty will ensure that sugar from international markets does not flood the domestic market, which already has a surplus of 20-25 lakh tonnes.
Verma said the prices of sugar could increase by a rupee or two in the wholesale market where it is currently trading between Rs 28 and Rs 31 per kg.