India to Raise Sugar Import Duty to Help Mills Pay Farmer Dues

India will increase a tax on sugar imports to prevent cheap inflows and extend a subsidy on exports to help mills clear cane dues of 110 billion rupees ($1.83 billion) to farmers, Food Minister Ram Vilas Paswan said.

The tariff on imports will be increased to 40 percent from 15 percent and cash incentives of 3,300 rupees per metric ton on raw sugar exports will be extended until September, Paswan told reporters in New Delhi today. The government will increase blending of ethanol with gasoline to 10 percent as soon as mills clear farmer dues, he said.

India first announced the subsidy for raw sugar exports in February to help mills clear dues to farmers after stockpiles jumped to the highest level in five years and weakened prices. Exports slowed after local prices rose above global rates, turning away potential importers.

“The decisions would benefit the industry and improve the liquidity of sugar mills, which would help the industry clear the pending payments to the cane farmers at the earliest,” Indian Sugar Mills Association’s Director General Abinash Verma said in an e-mailed statement. “Also there is a need to improve the sugar prices to allow mills to at least cover their cost of producing sugar.”

Increasing the import duty to 40 percent will ensure that sugar from other nations doesn’t find its way into India, Verma said. The measures may boost domestic sugar prices, he said.

The government will also allow mills to access as much as 44 billion rupees in interest-free loans from banks to pay farmers’ dues, a government official, who asked not to be identified citing policy, told reporters in New Delhi.

Stock Rally

Shares of sugar mills rallied in Mumbai after the announcement. Bajaj Hindusthan Ltd., the largest producer, surged 9.9 percent to 29.30 rupees, Balrampur Chini Mills Ltd., the second-biggest, jumped 6.9 percent to 84.80 rupees and Shree Renuka Sugars Ltd., the largest refiner, advanced 10.3 percent to 29.40 rupees.

India’s sugar output fell to 24.2 million tons in the season ending Sept. 30 from 25.1 million tons a year earlier, according to the mills association. Domestic consumption is seen at 24 million tons this crop season, leaving stockpiles of about 7.5 million tons by the end of September, it estimates.

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