Raw sugar imports may check price hike in festive season: ICRA

Mumbai: The government decision to permit raw sugar import of 0.30 million MT at a concessional duty of 25 per cent may supplement sugar supplies in the sugar deficit southern and western states and also benefit consumers from possible price shocks during the forthcoming festive season, a report said.

The Centre has recently permitted raw sugar import of 0.30 million MT at a concessional duty of 25 per cent as against the existing import duty of 50 per cent, with an aim to check the rise in domestic sugar prices by maintaining adequate domestic sugar supplies, ahead of the forthcoming festive season.

This move is unlikely to have any significant impact on sugar prices or profitability of the sugar mills in the near term, given that the quantum of import permitted is very small, rating agency ICRA said here.

"The move could supplement sugar supplies in the sugar deficit southern and western states and also benefit consumers from possible price shocks in the festive season. However, the small quantum of additional supplies, it is unlikely to have any significant negative impact on the prices or profitability of sugar mills in the near-term," ICRA Senior Vice President Sabyasachi Majumdar said.

"This is because including the 0.3 million MT of imported sugar, the closing stocks for current season are estimated to be around 4.7 million MT, which would just be sufficient to meet the requirement of around two months of domestic consumption," added Majumdar.

Also this is still lower than the normative stock level of three months (around 6 million MT) and also previous year's closing stock level of 7.8 million MT, Majumdar said.

After announcing a hike in the import duty during July 2017 from 40 per cent to 50 per cent in order to curb dumping of sugar in the domestic market as international prices fell, the Centre, through a notification issued in August 2017, has imposed a stock limit on sugar mills for September and October 2017 to keep prices in check during the festive season.

While the quantum of imports is low, it would be a positive for mills based in the west and the south, which are currently under profitability pressure due to low cane availability, Majumdar added.