The New Nation - Internet Edition

ACCORDING to press reports, a Taka 2,000 crore plus investment in the sugar refinery sector has become 'uncertain', as narrowed duty gap has made locally refined sugar less competitive with imported finished sweetener. Inferior quality imported sugar is controlling the local market and crowding out the locally refined sugar leading to closure of a big unit after less than two years of operation. Others will have to face the same fate if the trend continues. 'Our business is at stake and we are losing ground every day as import duty difference between raw and finished sugar has been kept irrationally low. Importing refined sugar is now more profitable than refining and selling it locally,' a refinery unit operator was quoted as saying. The tariff measure was an incentive for importers at the cost of refiners who invested heavily in recent years. Duty on raw sugar was increased to Tk. 4,000 from Tk 2,250 a tonne while that on white sugar was kept unchanged at Tk 5,000 a tonne in the 2007-2008 financial year.

Although the local refineries were producing European Union-standard high quality white sugar, they were losing money as imported sugar was flooding the local market. Investment in sugar refinery was a bitter experience, which is enough to frighten large-scale investors in the sector in future as lamented by one of them.

Before going to sugar refinery, the investors studied the potentials of the industry. Assessing the average price differences between raw and finished sugar in global market, that was calculated and considered if local refiners produced even one million tonnes annually, local value addition would be around $ 65 million making the local market supply stable. Bangladesh's annual demand for sugar is estimated at 1.2 million tonnes while the state-owned sugar mills can supply around 150 thousand tonnes. The gap is met by import and smuggling until the local refiners came to the scene. The refiners are of the view that import duty on refined sugar should be increased to Tk 8,000-10,000 a ton to save the local refinery units.

Besides, the government should ban sugar import through land ports, they said. 'We do not oppose import of finished sugar, we just want supportive policy from the government for us to have a level playing field here' as one chief of the sugar refinery was quoted as saying.

Sugar import was legalised in 2003 ending decades of state monopoly in the sugar trade. But consumers benefited little from the step as an alleged syndicate of importers used to control the market by manipulating prices and supplies. Sugar price soared to Tk 62 a kilogram in early 2006 prompting the government to lower import duty on sugar and allow import of raw sugar that lured leading business houses into sugar refineries. The government should remove duty anomalies to protect local industries from losing ground to importers of cheap and low quality sugar that is now being dumped from across the border.