TN sugar mills ask Govt to offer support package

Sugar mills in Tamil Nadu have sought a comprehensive support package including sugarcane pricing reform, capital subsidy for mechanised harvesting and tax reforms to bail out the industry.

In a representation through the South Indian Sugar Mills Association – Tamil Nadu, the industry has suggested that the State Government take steps to link sugarcane price to prices of sugar and by-products. An expert committee constituted by the Centre in August 2010 suggested that sugarcane price could be set at 62 per cent of the gross realisation from sugar and by-products – molasses and bagasse – or simply at 70 per cent of sugar realisation.

The State Government could constitute an expert committee to adopt this system. Additionally, the formula could provide for a buffer by ensuring during high sugar prices there is a ceiling on the price of sugarcane.

The balance should go into a fund to be paid out when sugar prices are low. The Government could directly pay farmers when there is a price shortfall.

Biggest challenge

The association has pointed out that sugar output has declined sharply from the peak levels, despite strong increases in sugarcane prices which have nearly doubled to about Rs 2,000 a tonne in the last few years.

Economic factors more than just prices have affected the development, the association said. High labour costs and shortage are the biggest challenge for the mills and farmers.

On mechanisation of harvesting, the sugar mills have asked for 50 per cent capital subsidy for investments in mechanisation of harvesting operations; exemption from purchase tax to enable balance investments in mechanisation; deployment of Mahatma Gandhi National Rural Employment Guarantee Scheme labour for harvesting; and exemption of value-added tax on harvesting equipment.

High labour costs

In the last few years, labour costs have increased from about Rs 100 a tonne of cane to over Rs 700. Shortage and high cost of harvest labour is the biggest challenge facing the industry. Despite mobilising labour from other States, mills' capacity utilisation range around 50-60 per cent on a daily basis because they are not able to move adequate cane from the field to the mills.

Similarly, micro irrigation has to be expanded with adequate changes in the existing support systems. Though 65 per cent financial support is available from the Centre and State, the ceiling is at a ‘ridiculously' low level and discourages farmers, SISMA has said.

SISMA has also asked the State Government to endorse the country's ethanol-blended fuel programme in line with the election manifesto.

Input tax credit

On taxes, SISMA has said mills now pay sales tax on molasses and purchase tax on cane but are not allowed to avail of input tax credit which is against the principle of VAT.

Sugar mills should be allowed the benefit of input tax credit.

With Goods and Services Tax in the offing, the tax rate on sugar when it comes into vogue should not exceed Rs 37 a quintal, which was prevalent under the Additional Excise Duty earlier in practice. Levy of GST should be co-ordinated with other States.

VAT on ethanol

Sugar mills have requested that the tax on molasses be levied at Rs 100 a tonne with the tax paid to be ‘vattable' since all output products of the distillery are taxable at maximum rates under VAT.

VAT rate on ethanol should also be brought down to 4 per cent from the prevailing 12.5 per cent like other States.

The industry has also asked the State Government to consider bringing down the tax on rectified spirit and extra neutral alcohol and do away with tax on co-generation and self-generation.

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