The Hindu Business Line : Molasses duty cut to Rs 750/t

THE Finance Minister, Mr P. Chidambaram, on Monday brought partial relief to the sugar industry by reducing the excise duty on molasses to Rs 750 a tonne from Rs 1,000 asproposed in the Budget.

The sugar industry will now have to shell out an additional Rs 100 crore on an annual basis this fiscal compared with the last fiscal when they were charged an excise duty of Rs 500 a tonne.

Mr Chidambaram attributed this move to representations from the sugar industry and the Agriculture Ministry.

The decision would have an impact on the quantity of molasses directed towards potable liquor use, since users can claim Modvat credit on molasses that go for industrial purposes. .

Sugar mills in the country crush on an average 180 million tonnes (mt) of sugarcane every year, which at a molasses recovery rate of 4.5 per cent, yields roughly 8 mt of molasses. Assuming 50 per cent of molasses go for industrial purposes (on which Modvat credit can be claimed) and the remaining towards potable liquor use (on which Modvat credit is not provided), the duty of Rs 750 would contribute an excise revenue of Rs 300 crore.

As against this, the proposed duty of Rs 1,000 would have generated Rs 400 crore for the Government. The pre-Budget levy of Rs 500 would have generated Rs 200 crore for the Government.

In his Budget speech, Mr Chidambaram had justified the move to double excise duty on grounds that molasses prices had increased significantly in the last couple of seasons and the Government was entitled to partake a share of the higher revenues accruing to the sugar industry.

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