Indonesia keen to buy sugar from India; seeks duty cut
What's the story
Indonesia is interested in buying sugar from India but wants the latter to cut import-duty on refined palm oil and the sweetener substantially to 45% and 5%, respectively, according to sources. An Indian delegation will visit Indonesia this week to negotiate trade for these two commodities. While India is the world's largest sugar producer, Indonesia is a major producer of edible oils, particularly palm.
Suggestion
Changing existing law, time-consuming; Indonesia suggests trading arrangement under FTA
The Indonesian government is believed to have communicated that it was "not averse" to a bilateral arrangement with India on palm oil and sugar but it would take a long time to bring changes to the existing law for facilitating trade, the sources said. Instead, Indonesia has suggested a trading arrangement under the India-ASEAN free trade agreement (FTA), the sources added.
Trade agreement
CECA between India, Malaysia to start in January 2019
Indonesia suggested the arrangement so that import duty on refined palm oil and sugar is harmonized to 45% and 5%, respectively, to facilitate trade. Indonesia argued that the Comprehensive Economic Cooperation Agreement (CECA) between India and Malaysia will come into effect from Jan'19 that provides for a preferential import duty of 45% on refined oil as opposed to 50% duty under the India-ASEAN FTA.
Information
India imports up to 15MT of vegetable oil annually
At present, India levies import duty of 54% on refined palm oil, 44% on crude palm oil, imported from Indonesia and Malaysia, and 100% on sugar. India imports 14-15MT of vegetable oils, including soybean oil from Brazil and Argentina, annually to meet its domestic demand.
Production
Sugar: India sitting on surplus stock of over 10MT
However, in the case of sugar, India is sitting on a surplus stock of over 10 million tons (MT) on record production last year and bumper output is expected this year as well. The Indian government asked millers to export 5MT of sugar mandatorily this year and has even given financial assistance to facilitate trade. So far, 8,00,000 tons of sugar has been exported.
Data
China has agreed to buy raw sugar from India
India has produced 32.5 MT of sugar in 2017-18 marketing year (October-September). India is also in talks with China and Indonesia to export surplus sugar and help mills clear cane arrears to farmers. China has, in fact, agreed to buy raw sugar from India.