Govt hikes sugar import duty to 40%, scraps duty-free import scheme

The union cabinet today gave its approval to increase import duty on sugar from 25 per cent to 40 per cent in a move to reverse the declining trend in prices and improve industry sentiment.

Accordingly, the duty on import of sugar under the Open General License (OGL) will go up to 40 per cent from the existing 25 per cent. This, the government says, would prevent any imports in case international prices of sugar were to decline further.

The cabinet also decided to withdraw the `Duty Free Import Authorisation' scheme (DFIA) for sugar. Under the DFIA, exporters of sugar could import permissible quantities of raw sugar duty-free, for subsequent processing and disposal. To prevent leakage of sugar made from such duty-free imports in the domestic markets, the DFIA scheme for sugar would be withdrawn, an official release said.

Similarly, the period for discharging export obligations under the `Advanced Authorisation Scheme' for sugar has been reduced to six months, so as to prevent any possibility of leakage into the domestic markets.

The cabinet also decided that ethanol produced from molasses generated during the next sugar season and supplied for ethanol blending would be exempted from excise duty and the price benefit would be passed on the to the sugar mills/distilleries. At present, 12.36 per cent central excise duty is levied on ethanol.

These measures are aimed at improving the adverse price sentiments in respect of sugar and would improve the liquidity in the industry, facilitating the clearing up of arrears of cane dues to farmers, according to the government.