ISMA Calls For Reinstating Regulatory Mechanism On Release Of Freesale Sugar

New Delhi, December 22: | Updated: Dec 23 2002, 05:30am hrs
The Indian Sugar Mills Association (ISMA) has demanded reinstating of the regulated periodic mechanism for the release of freesale sugar and exemption of basic excise duty on sugar for one year which is currently charged at Rs 34 per quintal.

Further, ISMA has said that one year holiday in the levy of Central cess of Rs 14 per quintal on sugar be allowed; priority sector status for sugar industry; continuance of additional excise duty on sugar in lieu of sales tax in the event of implementation of VAT, concessional excise duty surcharge on ethanol doped petrol and reduction of excise duty on molasses from the current level of more than 100 per cent.

In its pre-2003-04 budget memorandum submitted to finance minister, Jaswant Singh, ISMA director-general Shanti Lal Jain said that the sugar industry has suffered an estimated loss of Rs 4,000 crore and in the current year alone the losses work out to Rs 3,000 crore, primarily following the dismantling of periodic release mechanism of the freesale sugar backed by orders of various high courts.

The freesale sugar prices are prevailing far below the levy sugar price notified by the government based on statutory minimum prices (SMPs) of cane from different zones. In regions where cane prices were declared in advance, the losses are being bored by the industry. In those regions where cane prices are determined on the basis of sugar price realisations, the cane growers are being paid a lower price.

Mr Jain said that sugar is an essential item of mass consumption and several countries have exempted sugar from levy of duties. The Centre has accorded high priority for agro-based processing industries and has exempted processed fruits, jam, jelly etc from levy of excise duty and hence there is ample justification for such benefits to be extended to sugar industry.

Fruther, Mr Jain said that the government may incur a revenue loss of Rs 580 per year on account of removal of excise duty on sugar, but can garner a significant revenue of Rs 1,800 crore annually from the sugar byproducts and from additional excise duty on sugar. The Sugar Development Fund (SDF) currently has a corpus of Rs 1,500 crore. The collection of surcharge on sugar, cess on despatches of sugar and return of loan taken from SDF and interest and penalties paid thereon are all accredited to the SDF.

Annual disbursement from SDF is about Rs 250 crore per year. The withdrawal of surcharge on sugar for a year will, therefore, not affect the SDF to a great extent as annual realisation from cess, interests and penalties amount to Rs 400 crore. Mr Jain alleged that after the withdrawal of selective credit control policy by the RBI, the banks are hesitant in providing requisite finance to the sugar sector causing delay in cane price payments and affecting the operation of the mills. In 2001-02 sugar year, the cane price arrears stood at Rs 1500 crore due to inadequate credit apart from fall in sugar prices in recent months. As sugar industry has not been accorded the status of priority sector, despite being recognised as a food item under the PFA Act, the industry is unable to source easy credit from banks. He said that the banks should continue to extend easy loans to ethanol plants of sugar mills for fulfiling their target.

Hike In SMP To Cost Industry Rs 900 Crore More Per Tonne
The recent hike in SMP of sugar would additionally cost the industry over Rs 900 per tonne, said ISMA president SL Jain. Since the SMP is linked to principal recovery of sugar in lieu of 8.5 per recovery, the sugar mills registering better recovery through technological upgradation will be the worst suffer, he added.

Welcoming the Prime Ministers recent decision to reinstate the periodic release mechanism for freesale sugar, Mr Jain, however, criticised the decision to hike SMP for cane from Rs 64.50 to Rs 69.50 per quintal and linking it to principal recovery of sugar.