Beverage taxes haven't yet proven a bitter pill for domestic sugar producers

By Lester Wan contact

- Last updated on GMT

Thai sugar producers have not seen a drop in demand, while the Philippines Sugar Board now has a funding of 600m pesos for small sugar farmers. ©GettyImages
Thai sugar producers have not seen a drop in demand, while the Philippines Sugar Board now has a funding of 600m pesos for small sugar farmers. ©GettyImages
Asia’s domestic sugar producers appear to be weathering the storm of sugar taxes, with steady local demand, strong exports and favourable tariffs aiding the sector.

Several countries, including Thailand, the Philippines, Sri Lanka and Brunei have imposed some form of sugar tax on beverages in recent months.

Thailand introduced its sugar tax last September, phasing in its introduction over six years.

However, Thai sugar producers say they have not seen a noticeable drop in local demand, while its status as the third largest exporter of the sweetener should also shield it from heavy blows.

According to the US Department of Agriculture (USDA), Thailand produced 11.23 million tonnes of sugar in the 2017 financial year, making it one of the top three sugar producers in the world.

The Nikkei Asian Review ​states that the South East Asian giant consumes about 2.65 million tonnes of sugar annually. This means that three-quarters of its sugar production is eventually exported to other markets.

However, with the sugar taxes set to increase over time, the longer-term impact on trade remains to be seen.

Another domestic sugar market that appears to be thriving is in the Philippines.

Despite the introduction of a sugar tax in January, beverage makers in the country have been reportedly switching imports of high-fructose corn syrup from China for domestic sugar in order to reap tax advantages.

The new laws imposed a tax of 6 pesos ($0.12) a litre on drinks using sugar and other sweeteners, while the levy on high-fructose corn syrup is 12 pesos.

Officials say the policy, part of a raft of tax initiatives, will be used to fund domestic infrastructure investment.

Extra cash

The country’s Sugar Regulatory Administration (SRA) raised the domestic allocation of locally-produced sugar to 93% from 80% to meet the expected demand.

Last month, Sugar Board director Emilio Yulo III stated that a funding of 600m pesos (about US$11.5m) is available for small sugar farmers under the Socialised Credit Program of the Land Bank of the Philippines.

The fund is part of the 2b pesos annual allocation for the sugar industry under the Sugarcane Industry Development Act (Sida).

Small sugar planters with a land area of five hectares and below could get a loan of 40,000 pesos per hectare.

Meanwhile, in related news, in India, it is anticipated that the government will make an announcement shortly to scrap its export duty on sugar.

This comes as the sugar industry has forecast a record output in the second year running.

“We are hopeful that the government will very soon remove the export duty on sugar,” ​Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories (NFCSF) told reporters.

Representatives of the NFCSF and the Indian Sugar Mills Association (ISMA) had met food ministry officials after revising up India’s 2017-18 sugar production estimate to 29.5 million tonnes.

To reduce the closing stock of 2017-18, sugar industry executives said the plan was to export 1.5 to 2 million tonnes of sugar until October.

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