Eye on Maharashtra polls, Centre ups sugar import duty

The government on Friday raised the import duty on sugar to 25 per cent from the current 15 per cent, a decision being touted as a gift to India’s largest sugar producing state Maharashtra going to polls in the next two months.

But the consumers will have to pay for the politically sensitive step.

The sugar mills and cane growers in Maharashtra have traditionally supported the Congress-NCP alliance.

The higher import duty on sugar is also expected to benefit cane growers in Uttar Pradesh but will make it completely unviable to import the sweetener into the country, making it possible for the industry to raise prices in the domestic market from the current level of around Rs 40 per kg.

A government notification said the decision has been taken in the public interest. The import duty has been raised on raw sugar and refined or white sugar. The higher duty will also be applicable to bulk consumers who import raw sugar.

The step was taken after sugar mills complained that they were facing cash crunch after domestic sugar prices flipped below their cost of production.

According to mill owners in Uttar Pradesh, sugar was selling at Rs 30.50 per kg, while the cost of production remained at Rs 37 per kg. Similarly, mills in Maharashtra were selling sugar at Rs 28.50 per kg as against the cost of production of Rs 31.

The Indian Sugar Mills Association has welcomed the decision saying this would help financially weak sugar manufacturers as they have accumulated arrears to the tune of Rs 6,800 crore.

Earlier this year, the government had allowed sugar mill owners to avail Rs 6,600 crore interest-free loan to make payments to cane growers.

India is the world’s largest producer of sugar after Brazil and is expected to produce a little above 24 million tonnes in 2013-14 marketing year ending September.