Why Modi government may scrap 100% duty on sugar imports
What's the story
India, the world's second-largest sugar producer, is mulling a cut in its import duty on sugar. The move comes as domestic prices of the commodity have hit a record high amid weak monsoon rains and rising festival-season demand. Officials are considering proposals to lower or even scrap the 100% tax on inbound shipments to boost local supplies.
Concerns
Record high prices
The El Nino weather phenomenon has raised concerns over potential crop failures, pushing New York futures to a one-year high.
In India, the monsoon rains vital for sugarcane crops are 13% below normal. This deficit was more than 40% at the end of June, delaying sowing of some crops.
Ex-mill sugar prices in Maharashtra have hit a record high of ₹46 per kilogram.
Demand surge
Early crushing to meet demand
Sugar consumption in India usually peaks from late August to January, as the festival season triggers a rise in demand for traditional sweets, processed foods, and beverages.
To meet this demand, factories in Uttar Pradesh and Maharashtra, the country's top sugarcane-producing states, are planning to start crushing 10-15 days earlier than the usual early-November start.
This is being done after consultations with the food ministry.
Inflation control
Government measures to control prices
The Indian government has also imposed stockpile limits on traders. This is aimed at curbing hoarding and controlling inflation risks amid the rising sugar prices.
Notably, India doesn't usually import sugar for domestic consumption, with significant imports last seen in 2017-18.
As of August 14, sugarcane was planted on 5.83 million hectares, slightly below last year's level at this time of year.