New Delhi: Anxious that the country’s sugar production could fall below 20 million tonnes (mt) in the current season, the government may allow import of raw sugar for domestic sales.

The existing policy allows sugar mills to import sugar, but only for refining and re-export. Now, the government proposes to liberalize this policy by allowing raw sugar imports for refining and sale in domestic markets, thanks to extensive lobbying by some sugar companies; an equivalent amount can be procured and re-exported at a later date, probably within two years, said two senior government officials.

Taking stock: A file photo of Union agriculture minister Sharad Pawar. He had hinted on Monday that raw sugar imports may be allowed. Gregorio Borgia / AP

The government recently revised the outlook for domestic sugar by pegging the output lower at 20.5mt, compared with 22mt forecast earlier.

“Looking at these trends, we are evaluating the possibilities of importing raw sugar on a tonne-to-tonne basis," the same official said.

With the carry-over stock from last season at 10.5mt, the government had appeared confident in October-November about sugar availability in the current season.

The country’s sugar consumption in the current season is expected to touch 22mt.

Officials at the food ministry are chalking out plans to meet the shortfall, said the same official. He added that the ministry has been getting representations from several sugar companies and cooperatives that they should be allowed a tonne-to-tonne import of raw sugar.

A tonne-to-tonne import of raw sugar has no immediate re-export obligation compared with a grain-to-grain import, where the sugar has to be re-exported after being processed within a period of two years.

Some experts, however, say that there is no need to import raw sugar.

“There is no economic logic in importing raw sugar, given the carry-over stock. However, the government is having a relook as the acreage and production estimates are going down, which may lead to rising sugar prices this season. This decision to import raw sugar is probably being governed by political compulsions," said a Mumbai-based economist closely tracking sugar, who did not want to be identified given the sensitivity of the situation.

Raw sugar has to be processed before it is ready for consumption. Mills importing raw sugar get extra business by refining and selling it in the domestic market. White sugar, by contrast, comes ready for consumption.

As reported by Mint on 13 December, sugar mills in Maharashtra sparked a debate on import of raw sugar on a tonne-to-tonne basis, which several others opposed.

The government last allowed import of raw sugar under the tonne-to-tonne system in 2004-05. Sugar imported under such a system is allowed to enter the domestic market and many sugar companies say this results in depressing of prices by creating excess supply.

“We have seen a serious fallout of allowing import of raw sugar in 2004-05, which resulted in falling prices of sugar. Import of raw sugar through a tonne-to-tonne mechanism should not be allowed at all," said a senior executive at a sugar company based in Uttar Pradesh on condition of anonymity.

On Monday, Ranjit Puri, former president of the Indian Sugar Mills Association, or Isma, a sugar industry group of at least 175 members, said: “The stock position in the country is very comfortable. Even according to the most pessimistic estimate, we will have a four months sugar stock as on October 2009. We, therefore, see no justification to promote import of sugar at present."

“Those in favour of import of raw sugar include certain Isma members as well," said the same food ministry official.

Sharad Pawar, Union minister for food and agriculture, on Monday had also hinted that the government may allow import of raw sugar. Pawar, president of the Nationalist Congress Party, has a large support base in the sugar producing belt of Maharashtra, from where six of its 11 Parliament members are elected.