Centre may levy cess on sugar, lower GST on ethanol to help clear dues

With sugarcane arrears crossing the Rs 180 billion mark, bulk of which is from the politically sensitive state of Uttar Pradesh, the Centre said on Monday that it might consider levying a cess on sugar to the tune of 5 per cent, a production-linked export subsidy of about Rs 4.5 per kg and lower the GST on ethanol from the current 18 per cent to 5 per cent.

A high-powered panel of ministers led by Transport Minister Nitin Gadkari discussed all the three proposals and a formal cabinet note on them is expected to be made soon.

"We might soon place all the three proposals before the cabinet," Food Minister Ramvilas Paswan said after the high-powered meeting of which he was also a part.

The decision comes amid allegations of farmers that despite having almost 20 per cent of sugarcane standing in their fields, a few mills in western Uttar Pradesh have simply stopped issuing indents or have slowed them down considerably, forcing them to sell the crop to local jaggery makers at much lower rates.

Indents are written assurances that sugar mills issue to farmers within their pre-demarcated areas to purchase sugarcane from them at rates fixed by the state government.

For the 2018-19 sugarcane marketing season, the state advised price of sugarcane determined by Uttar Pradesh government is Rs 315 per quintal for normal varieties and Rs 325 per quintal for early sown varieties, while local jaggery makers have been purchasing sugarcane at around Rs 150-200 per quintal.

However, jaggery makers pay in cash while payment from sugar is delayed due to mounting arrears, forcing growers to sell sugarcane at low rates to clear fields.

Though the state government has mandated that mills have to purchase all the cane held by farmers, a sharp drop in ex-mill prices due to a bumper harvest has curbed the mills’ ability to pay cane prices to farmers on time.

“The government had promised that it will ensure payments within 14 days of the supply of sugarcane, but the mills are not issuing indents to farmers despite a standing crop. As a result, farmers are unable to clear fields and sow the next crop,” said Pushpendra Singh, president, Kisan Shakti Sangh, a farmers’ group.

India’s sugar production in the 2017-18 season (October-September) is projected to be over 30 million tonnes, nearly 10 million tonnes more than last year, while consumption is estimated to be around 24-25 million tonnes.

In Uttar Pradesh alone, according to some estimates, sugar mills owe almost Rs 110 billion to sugarcane farmers as on April 17, almost double the amount due during the same period last year.

According to the Indian Sugar Mills Association (ISMA), sugarcane arrears nationwide have reached over Rs 180 billion till the middle of April.

“With the rise in production and supply, prices had come under severe pressure, and compared to the cost of production, the current ex-mill sugar prices were around Rs 8 per kg lower,” the ISMA said in a statement issued a few days ago.

Of the Rs 110 billion sugarcane arrears in Uttar Pradesh, sources said the bulk were due by four or five major producers.

The Centre on its part, recently wrote a letter to chief ministers of all sugarcane producing states to take strict action against defaulting sugar mills and ensure that farmers’ payments are made on time.

The National Federation of Cooperative Sugar Factories, the umbrella organisation of all cooperative sugar mills in India, along with the ISMA in a recent petition demanded that the government should immediately announce an export subsidy of Rs 1,000 per quintal to push at least 2-3 million tonnes of sugar outside India as domestic prices have crashed sharply.

“The current international price is 25-30 per cent lower than domestic prices, thus Indian millers will comparatively lose around Rs 10 per kg on exports, making them unviable,” India Ratings said in a note.comparatively lose around Rs 10 per kg on exports, making them unviable," India Ratings said in a note.