Part of India’s sugar export quota to the Maldives has been ‘diverted’ to Sri Lanka in Malaysia

Some Indian exporters have allegedly misappropriated some of the 64,494.33 tonnes of sugar allocated to the Maldives by the Center under the bilateral agreement between the two countries.

The Directorate General of Foreign Trade (DGFT) on April 5, 2024, issued a notification under the agreement allowing import of rice, wheat flour, dal, sugar, eggs, potatoes and onions, besides stone aggregate and river sand.

While India has not allowed sugar exports for the 2023-24 season (September-October) due to the decline in production, it has allowed shipments of limited quantities to a few countries, such as the Maldives.

80 containers land in Colombo

Trade sources, speaking on condition of anonymity, said that 80 containers of sugar from that country, approved for export to the Maldives, recently landed in Colombo, Sri Lanka.

A copy of the consignment note of September 30, 2024 has been made available business line showed that the shipments weighing 270 tonnes were made from the port of Nhave Sheva and the final port of destination was Colombo.

The bill indicated that the cargo was transported to Male, Maldives at the consignee’s risk. Trade sources pointed out an interesting note in the bill that required empty containers to be handed over to a “carrier-designated depot in Colombo for the account of the consignee.”

“Is Male so small that the container should be sent back to Colombo? The fact is that this sugar was made available to Sri Lankan traders,” said the first trader.

The invoice issued for the shipment showed a cost and freight charge of $580 per tonne, for a total of $156,600 to be paid by the Colombo-based company to the UAE shipper. The recipient had to be “informed”.

Destination switch

Another invoice dated September 23, 2024 showed that the Dubai-based company sold another 270 tonnes to an unnamed recipient at a price of $585 per tonne for a total value of $157,950. However, she demanded that the Colombo-based company be notified.

The first trader claimed that the invoice had changed the destination to Colombo and the buyer had been changed to a Sri Lankan trader.

The third document released shows that 270 tonnes of cargo was shipped from Nhava Sheva port to Port Klang in Malaysia in March this year. There was no mention of a route or transshipment.

However, the attached leaflet stated that “the cargo was in transit to the Maldives”. The document includes the name of a company based in the United Arab Emirates. The shipment took place in March 2024. Sources said it came from sugar allocated to the Maldives for 2023-24.

“Why should sugar for Male go to Port Klang from Nhave Sheva? Sugar exports are not allowed to Malaysia, raising suspicions about the role of officials,” a second trade source said.

Attack on coastal refineries

Traders say Sri Lanka imports sugar to meet its needs and its monthly requirement is around 60,000 tonnes. “Such imports distort the market and harm trade. This kind of distraction makes a mockery of India’s trade restrictions on sugar,” the first trader said.

This diversion affects coastal sugar refineries that import raw sugar under the advance authorization program and re-export it after refining.

Sources say the practice for such “unscrupulous acts” is to generate export and customs clearance documents for the country to which shipment is permitted. Once the cargo is exempt from customs duties, they forward the bill of lading to the intended destination and replace the invoice.

The trade expert said there was no adequate mechanism to prevent such “unscrupulous activities” and officials, especially customs, could not be blamed. However, the expert wondered why Malaysia or Sri Lanka could not notify India of the introduction of a product whose export has been banned from India.

The Directorate General of Foreign Trade (DGFT) should obtain a receipt confirming that the shipment has reached its destination. “If this is asked, none of this will happen,” a second trade source said.

The data showed that the sellers have no relationship with any Maldivian company for the sale of any goods.