India, the world’s second largest sugar producer, may hike the import duty on sugar to help its distressed cane farmers and mills that are reeling under the effect of low domestic and international prices.

The food ministry will push for a duty hike from 25% to 40%, said Ram Vilas Paswan, minister of consumer affairs, food and public distribution, on Wednesday. The minister was speaking after meeting farmers’ representatives from the 13 cane-growing states, a day ahead of his meeting with the chief ministers from these states.

A rise in the import duty will make imports uneconomical for sugar refiners despite a plunge in global prices.

The global sugar price index averaged 187.9 points in March —a sharp decline of 9.2% from February and the lowest since February 2009, according to the Food and Agriculture Organization (FAO) of the United Nations (UN). This was due to improved crop prospects globally, the UN body said earlier this month.

The domestic wholesale sugar price index was 175.3 in March, almost 10% lower than wholesale prices in October 2014 and 5.6% lower than the December 2009 prices.

India is also the world’s biggest sugar consumer, and currently, with the import duty at 25%, does not import sugar, said food secretary Sudhir Kumar on Wednesday.

“Sugarcane farmers are facing problems as mills owe them Rs.19,377 crore in dues from this season. We heard the farmers’ concerns today and will be meeting chief ministers from the 13 cane-growing states of the country tomorrow,” said Paswan. The mills also owe farmers an additional Rs.1,690 crore in dues from the last sugar season.

Farmers’ representatives have demanded the creation of a central buffer stock of 3 million tonnes (mt), government control on the quantity released in the market by the mills, support for the ethanol production, higher import duties and direct government support to farmers, said the minister. Paswan said that he would decide on the demands after hearing the states.

Sugar production in India is estimated at 26.5 mt in 2014-15, up from 24.4 mt in the previous year. After meeting the domestic demand, India is expected to have a closing stock of 9.5 mt by end of September. The dues to cane farmers are at a record high this year when compared to peak dues (as on March) of Rs.13,124 crore in 2013-14, Rs.12,702 crore in 2012-13, and Rs.8,577 crore in 2011-12.

In February, the government approved export subsidy on raw sugar to help mills cut distress sales and also clear the farmers’ dues. The mills were allowed to export 1.4 mt of raw sugar at a subsidy of Rs.4,000 a tonne.

“The decision on export subsidies came late. By February, international prices had crashed and mills could export only about 0.2 mt of raw sugar with the subsidy scheme,” said Abinash Verma, director general of Indian Sugar Mills Association, an industry lobby group.

“India is not importing sugar at present but a hike in import duty will help the domestic industry in the long run. The immediate need is to boost the domestic prices, and this can be achieved if the government steps in to purchase about 2.5 mt of sugar,” he added.

The large dues to cane growers comes in a crop season where farm incomes are under severe stress due to the recent spate of unseasonal rains, last year’s deficit monsoon and declining prices of key crops such as rice, wheat and cotton.

Source:livemint.com