The government on Tuesday hiked import duty on sugar to 15 per cent from 10 per cent to help the industry clear Rs. 9,000 crore cane arrears to farmers, a move that would make the sweetener costlier for the common man.

In a notification issued by the Central Board of Excise and Customs (CBEC), the duty of both raw and white (refined) sugar has been raised to 15 per cent.

The sugar imports have been putting pressure on domestic prices and have prevented millers from clearing cane arrears to farmers.

Currently, millers in Uttar Pradesh are selling sugar to wholesalers at rates lower than even the production cost, according to the industry experts.

The hike in duty is aimed at curbing import of sugar and improving the bearish sentiment in domestic market.

This would, however, lead to rise in sugar prices across the country.

Currently prices of sugar (loose) is ruling at Rs. 40 per kg and packed sugar at Rs. 50 per kg in Delhi.

Finance Minister P Chidambaram, Agriculture Minister Sharad Pawar and Food Minister K V Thomas had a meeting on July 4 to review the import duty.

After the meeting Thomas had said there was an agreement to increase the duty to 15 per cent to help industry in clearing outstanding payments to sugarcane farmers, which have risen to Rs. 9,000 crore from Rs. 5,000 crore in the last one year.

Industry associations like ISMA and NFCSF have been demanding a hike in import duty to 30-40 per cent, saying the country is having surplus sugar production.

According to the Indian Sugar Mills Association (ISMA), the country has imported nearly 6,00,000 tonnes of raw sugar and another 1,00,000 tonnes of refined sugar from Pakistan so far this marketing year.

“The import duty of 15 per cent may not be sufficient to stop imports completely,” ISMA Director General Abinash Verma said.

He said that market sentiments are dampened because of imports, leading to a fall in prices and deterring traders from stocking the sweetener.

Currently, ex-factory price of sugar in Uttar Pradesh and Maharashtra is ruling at Rs. 31 and 28.50 per kg, respectively, as against the production cost of Rs. 35 and Rs. 31 per kg, respectively.

The country has sufficient stocks to meet the domestic demand. Production is estimated to be at 24.5 million tonnes in 2012-13 marketing year (October-September), against the annual demand of 22-23 million tonnes.

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