To remedy the current sugar shortage, the Government of India initiated measures to support imports of raw sugar by the mills against future export commitments. Presently, almost all of the sugar imported into India is raw sugar imported by the mills for processing into refined sugar under the 'Advanced Licensing Scheme (ALS)'. Indian mills are finding it advantageous to import raw sugar to process and sell in the domestic market, as domestic sugar prices are currently well above the international prices, even after accounting for processing, transportation, and distribution costs, and future export obligations.

Under the ALS, mills are allowed to import raw sugar at zero duty against a future export commitment. The mills can refine the imported raw sugar and sell it in the domestic market, but must re-export 1.00 ton of refined sugar for every 1.05 ton of raw sugar imported within a specified period, which is currently 36 months (Source: USDA Foreign Agricultural Service).

Trade sources report that about 1.35 million tons of raw sugar was imported from October 2004 through March 2005, at prices ranging from $200 to $255 per ton CIF at Indian port, mostly from Brazil and South Africa. With the recent strengthening of international prices, imports are expected to slow as compared to the first half of the marketing year, and SY 2004/05 imports are expected to reach 2.0 million tons. (Source: USDA Foreign Agricultural Service)

India imposes an ad valorem duty of 60 percent on the CIF value, plus a countervailing duty (CVD) of Rs. 850 ($19.50) per ton, on 'general' imports of raw and refined sugar (tariff code 1701). The CVD is in lieu of the local taxes and fees on the domestic sugar (central excise tax of Rs. 340 ($7.80) per ton, additional excise duty of Rs. 370 ($8.50) per ton and cess of Rs. 140 ($3.22) per ton. The imported sugar is also subject to non-tariff barriers like the 'levy sugar obligation', the market quota release system, and other local regulations applicable to domestic sugar. The high import duties and other non-tariff barriers preclude imports of refined sugar by traders. (Source: USDA Foreign Agricultural Service)