The government of India may hike import duty on sugar to 75% from the existing 50% to dissuade imports and protect domestic prices from further depression.
The NCDEX spot market prices in Kolhapur, Maharashtra, and Kolkata, West Bengal, have reduced by Indian Rupees 3,950/mt ($63.2/mt) and Rupees 4,423/mt ($70.77/mt) since the start of the season on October 1 to Rupees 32,625/mt ($522/mt) and Rupees 33,550/mt ($536.8/mt), respectively, S&P Global Platts data showed.
Domestic sugar prices have tumbled due to a bearish sentiment stemming mainly from an expected steep recovery in production during the 2017-2018 (October-September) season, up 26% at 26 million mttq, along with strong crushing progress across the country, S&P Global Analytics data showed.
“India is planning to increase import duty to rule out any imports from Pakistan,” a trader said.
Imports are not competitive from any other origin at the current 50% import subsidy, the trader added.
Export prices for Pakistani low quality whites have dropped from around $360-$370/mt FOB Karachi to around $340-$350/mt Friday after an additional 1.5 million mt tranche of $102/mt subsidized exports was ratified by the Pakistani government on December 7.
The additional tranche was on top of 500,000 mt already allowed under the 2017-2018 season, taking the overall tally to 2 million mt in the current marketing year.
“By increasing [sugar] import duty from 50% to 75%-80%, India will make Pakistani offers uncompetitive even at the current low levels,” a market source said.
The Indian government has been taking several steps to support domestic sugar prices in India. Earlier in December, the government removed stock holding and turnover limits on traders that were in place since April 2016.
Under the earlier restrictions, a trader/dealer could only hold specified amount of sugar — 1,000 mt in West Bengal and North-East states, and 500 mt all other states — for not more than 30 days.
The Central government had introduced these measures to control the rise in domestic prices as production had dropped to 20.3 million mttq in 2016-2017 from a peak of 28.3 million mttq in 2014-2015 as India turned a net importer of 500,000 mt.
In an attempt to bolster the domestic sugar prices, the Indian government may also allow exports of raw sugar under the Duty Free Import Authorization scheme, which had been withdrawn in May 2015, market sources said.
Before the plan was abolished, the DFIA scheme allowed traders to import as much as they exported at zero duty within 18 months of their exports.