Faced with high food inflation, the government today exempted sugar imports from customs duty till March 31, 2011, even as the country has started exporting the sweetener and output is set to exceed demand this year.

In April 2009, the government had abolished import duty on sugar as domestic output had declined sharply to nearly 15 million tonnes against the annual domestic demand of 23 million tonnes.

The zero-duty regime lapsed on December 31, 2010, bringing into effect the earlier duty structure of 60 per cent.

A fresh notification issued by the Central Board of Excise and Customs (CBEC) dated January 8 has again brought down the import duty on sugar to zero till March 31, 2011.

"The exemption on sugar (raw/refined) has been extended by three months up to March 31 and since the notification is dated January 8, the import, if any, between January 1 and January 7 may not benefit by this exemption," Deloitte India Indirect Tax leader Prashant Deshpande told PTI.

Sugar production of India, the world's second biggest producer, is estimated to touch 24.5 million tonnes in 2010-11 sugar year (October-September) against the annual domestic demand of 23 million tonnes. Besides, the country has an opening stock of about five million tonnes.

On the expectation of better output, the government has allowed sugar exports of 1.5 million tonnes under Open General Licence (OGL) and Advance Licence Scheme (ALS).

In the wake of high food inflation, the government has slashed import duty on onion to zero and has extended zero duty on pulses till March 2012.

The inflation, mainly the food inflation, has been at uncomfortably high levels for the last few weeks.

Soaring onion and other vegetables prices led to the sharp rise in food inflation at 18.32 per cent for the week that ended on Christmas, up from 14.44 per cent recorded in the previous week.

However, sugar prices, which skyrocketed to nearly Rs 50 per kg in January 2010 have come down to Rs 30-32 each kg.