MUMBAI/NEW DELHI (Reuters) - India, the world's top sugar consumer, is raising the import duty on the sweetener to 15 percent from 10 percent currently to discourage overseas buying amid a drop in local prices due to ample supplies, two government sources said.
The duty increase could add to global sugar stocks and pressure prices further by halting India's sugar imports, which have already slowed to a trickle following a sharp drop in the rupee.
"In yesterday's meeting, food, finance and agriculture ministries have agreed to increase the duty to 15 percent," said a senior government official, who declined to be named.
"Informally, it has been agreed upon to increase the import duty on sugar, but a formal order in this regard has to come from the finance ministry," said another official at the food ministry.
Indian mills and traders mainly import raw sugar and sell it in the local market after refining. India has been importing sugar despite a surplus local production as the sweetener is cheaper in the world market due to a bumper sugar output in Brazil.
In New York, the front-month raw sugar contract fell to a three-year low of 16.02 cents a pound last week, weighed down by hefty global supplies.
India has imported around 700,000 tonnes sugar so far in the current marketing year that started on October 1, 2012, including imports of 100,000 tonnes white sugar, Abinash Verma, director general of the Indian Sugar Mills Association, told Reuters.
Since the beginning of the season, sugar prices have fallen 14 percent in the local market.
"In the last two months hardly anyone was importing raw sugar except Shree Renuka Sugars. The weak rupee has already wiped out whatever margin refiners have. In addition, higher duty will close import doors," said Kamal Jain, managing director of brokerage Kamal Jain Trading Services.
India's biggest sugar refiner Shree Renuka (SRES.NS) is planning to export refined sugar from its Haldia unit as returns are higher in the overseas market, Narendra Murkumbi, managing director of Shree Renuka Sugars, told Reuters in an interview on Thursday.
India is likely to produce 24.6 million tonnes of sugar in 2012/13, an industry body has said, against an annual demand of about 23 million tonnes.
(Additional reporting by Mayank Bhardwaj; Editing by Muralikumar Anantharaman)