The Hindu Business Line : Excise duty on sugar raised by Rs 9 a quintal

Turning bitter for mills
The additional duty will now make the total excise levy at Rs 95 a quintal.
Together with special educational cess of three per cent, the burden will be Rs 97.85 a quintal.

M.R. Subramani

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Chennai, Feb. 28 The Centre has increased the excise duty on sugar by Rs 9 a quintal. The levy will come into effect from March 1 and has nothing to do with the Budget being presented in Parliament on Friday.

“The additional duty will now make the total excise levy on sugar at Rs 95 a quintal and together with the special educational cess of three per cent, the burden will be Rs 97.85 a quintal for the sugar mills,” trade sources said.

Actually, the Centre had initially pegged the excise duty at Rs 71 a quintal. Then, following the setting up of the Sugar Development Fund (SDF), it imposed an additional Rs 14 a quintal, thus making it Rs 85. Last month, the levy was further increased by Re 1 a quintal.

Sugar Development Fund

“This levy is not related to the Budget as it is meant for the Sugar Development Fund being managed by Food and Consumer Affairs Ministry. Though the Central Excise authorities collect the levy, part of the collections go into SDF, which is exclusively meant for the industry’s benefit,” the sources said.

SDF is used for extending loans to mills for co-generation power projects, anhydrous alcohol and defraying expenses on internal transport and freight charges. It is also used for maintaining sugar buffer stocks.

Consumers, however, are expected to be unaffected by this additional duty on sugar. “It is demand and supply that dictate price in the sugar market and, therefore, this levy will not cast any burden on the consumer,” the sources said. “Basically, the duty is intended to help the industry,” they said.

With quite a few obligations being met out of SDF, the latest hike is expected to meet the increasing expenditure from the fund.

interest subvention

This hike, it is learnt, is particularly to meet part of the interest subvention or Government’s financial aid for the mills the Food Ministry has to bear towards payment of cane arrears. In October last, the Government had approved bank loans to the mills, equivalent to the actual excise duty paid by them during 2006-07 and the estimated amount payable in the current year. The interest on these loans with a tenor of five years with a two-year repayment moratorium was supposed to be borne by the Centre.

However, the Finance Ministry came forward to offer only interest subvention of 12 per cent. Of this, five per cent was to be borne by the Finance Ministry and the rest by the Food Ministry. Money for the Food Ministry for meeting this obligation had naturally to come from SDF.

It is learnt that the amount of money available in the SDF has become a cause for concern and, therefore, the Food Ministry decided to impose the additional levy.

According to the trade sources, the increase in the duty was very much on cards after an agreement was worked out on loans for the mills to pay cane arrears.

(As per the Economy Survey tabled in Parliament on Thursday, cane arrears as percentage of the price have increased to 6.2 per cent and outstanding dues have been estimated at Rs 1,830 crore.)

It is felt that the Centre could have avoided such a steep hike at one go and it could have been made in phases.

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