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Import duty on sugar up to 40%, no excise on ethanol for blending |
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NEW DELHI: The government on Wednesday announced a number of steps to support local sugar producers grappling with excess production and low prices, and help them pay arrears totalling more than Rs 20,000 crore to cane farmers.
It increased the import duty on sugar to 40% from 25% and withdrew duty-free imports of raw sugar. Both measures are aimed at curbing overseas supplies to support local prices. It has also removed a 12.36% excise duty levied on ethanol supplied for blending with petrol. Ethanol is added to petrol as a green measure to reduce the use of fossil fuel.
Sugar producers need to pay state-set prices for cane. Ex-mill sugar prices are at a six-month low after another year of surplus production and abundant supplies in the global market. Because of this, mills say they are unable to pay the arrears to farmers, which totalled Rs 20,099 crore as on March 31.
Non-payment could lead cane farmers to switch to other crops, reducing local sugar production and driving up prices, a situation that develops every few years in India, the world's largest consumer and second largest producer of the sweetener. Ensuring payment to sugarcane farmers is therefore a key concern of the government, especially at a time when critics term some of its policies anti-farmer.
The government has provided financial assistance to the industry, such as interest-free working capital loans and incentives for raw sugar exports, the food ministry said in a news release. "However, due to adverse price sentiments plaguing the sector, problems of cane arrears persist. Hence, we are announcing a slew of measures for the sector," it said.
Abinash Verma, director-general of the Indian Sugar Mills Association, said the decision to remove excise duty on ethanol would increase net realisation to sugar mills by around 5 per litre of ethanol, which should provide incentives to some mills to divert heavy molasses or cane juice into ethanol, reducing surplus sugar production from next year.
But, Verma said the immediate need of the industry is reducing a surplus of 3.5 million tonnes of sugar, which is blocking almost Rs 10,000 crore of cash flows for the industry. He wants the government to buy this sugar. "Only this measure will help the industry come out of the crisis in the short run and ensure that a major portion of cane price arrears of farmers are cleared before the start of the next sugar season (starting October)."
The increase in import duty under the open general licence programme to 40% would curb imports due to any drop in international prices, said the government.
It expects the withdrawal of duty-free import authorisation scheme for raw sugar to prevent leakages to the domestic markets.
Source : economictimes.indiatimes.com
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