Bidding Battle Begins for Sugar Imports

More than 60 applicants, including some from fuel and energy companies, were received by Mondays deadline from firms wanting to participate in auctions for quotas to import cane sugar.

The auction follows the government setting a 3.6 million-ton import quota on raw sugar from Dec. 16 until the end of next year to protect its domestic sugar beet producers.

All raw sugar under the quota will be imported at a tariff rate of 5 percent of its customs value. Sugar over the quota will be liable for a 30 percent tariff.

Information on the participants in the auction and the value of their bids, due to be transferred to the Central Bank on Tuesday, are to be kept secret.

The auction conditions state that all companies that had transferred at least 75,000 euros ($64,102) to a special account at the Central Bank before Nov. 20 would be admitted, regardless of their field of activity.

This amount was determined as the minimum bidding price for each of the 146 lots of 25,000 metric tons of sugar that will be put on auction.

Sugar manufacturing companies said that wealthy companies from other branches of industry, including the fuel and energy sector, will take advantage of the lack of barriers to admission to the auctions and will buy up most of the lots.

Deputy Economic Development and Trade Minister Maxim Medvedkov said he had seen several companies from the fuel and energy sector, "though only a few" in the list of participants. He did not know how much money these companies transferred, or for how many lots.

Data on the funds will be revealed only next Monday morning, after the auction has begun.

Andrei Kushnirenko, head of the department for tariff policy at the Economic Development and Trade Ministry, said he had not seen Gazprom among the applicants, but that such enterprises could take part through intermediaries.

Traders said no more than 30 companies will be admitted to the auction.

"Many companies are unable to muster sufficient funds to join the fray," said Vadim Moshkovich, general director of produce importer Rusagro.

"The applicants are well-disguised. Many new companies will participate in the auction, and its likely there will be several old faces behind the new companies," said Igor Khudokormov, chairman of the board of directors of food importer Prodimeks.

"Many companies that have participated on the sugar market for a long time have also made their application through an intermediary, in some cases firms specially created for the auction," said a representative with a major sugar trading company. "Its impossible to say who is who."

Market participants place the amount transferred by all participants at between $150 million to $200 million.

This means the auction risks hitting prices at which it becomes meaningless.

"If the participants have transferred $200 million to the Central Bank, this means that the quotas will cost $55 per ton," said Moshkovich, whose company has transferred "several tens of millions of dollars."

"Therefore, for trading companies there is no difference whether they buy the quota at auction and import the cane sugar at the favorable rate of 5 percent or if they import at 30 percent without participating," he said.

If there is no difference between participating or not, retail prices for white sugar will leap, he added.