The Hindu Business Line : ISMA seeks cut in excise duty for molasses

THE Indian Sugar Mills Association (ISMA) has urged the Union Finance Ministry to classify sugar industry in the priority sector to facilitate provision of adequate cash credit limit and prompt payment of sugarcane price as required under law.

According to the association, the industry has been persistently facing the problem of inadequate bank credit and consequent arrears of sugarcane price owing to negative perception of banks towards the sugar sector.

Except for two major banks (State Bank of India and Punjab National Bank), no other bank has added sugar in its portfolio in recent years.

In a pre-budget memorandum, ISMA said since the industry's credit requirement had grown substantially with much higher sugarcane crushing and sugar output level, SBI and PNB even while extending their cooperation, have, many a time not been able to sanction additional limits as needed. This is in view of their large exposure to one sector, which ultimately translates into the recurring problem of cane price arrears.

The association has submitted to the Finance Ministry that once credit to the sugar industry was placed in the priority sector, many banks would come forward to share the cash credit limits with the sugar mills.

Indirect tax: On the indirect taxes front, ISMA has appealed to the Ministry to consider bringing down the excise duty on molasses. It has urged it to either levy excise duty of eight per cent ad-valorem or at Rs 170 a tonne as has been suggested by the Expert Committee.

According to ISMA, it was hiked four-fold from 20 per cent ad-valorem to Rs 500 a tonne in 1997-98, while excise duties on all other commodities were rationalised. In 2005-06, the excise duty on molasses was again steeply hiked from Rs 500 to Rs 1,000 a tonne. It was later reduced to Rs 750 a tonne following representations.

The association is of the view that "even this rate of excise duty is excessively high when related to the current price of molasses as also the general rate of excise levied at eight per cent on various industrial inputs. The molasses price widely varies from State to State between Rs 1,000 to Rs 2,000 a tonne."

Fiscal benefits sought: ISMA has also urged the Finance Minster to provide timely fiscal benefits to accelerate the production and adoption of bio-fuels. In view of the multiple benefits of ethanol, the association has sought reduction of excise duty on ethanol-doped petrol. Though there was a reduction in special excise duty of Rs 0.30 a litre of ethanol-doped petrol, it was withdrawn in the 2004 Budget. The association has sought reintroduction of the same.

Further, ISMA has asked the Finance Ministry to extend 80 per cent depreciation benefit on plant and machinery for ethanol manufacturing and dehydrating plants on par with other renewable energy equipment such as wind turbines. It has also sought up to 80 per cent depreciation benefit for indigenously produced flex-fuel vehicles.