Sugar factories in Karnataka have urged the state government to waive an estimated Rs 132 crore purchase tax on sugarcane for crop year 2008-09. The mills, represented by South Indian Sugar Mills Association, have requested the state government to waive the purchase tax to enable them to pay Rs 60 per tonne to farmers towards the balance payment of additional cane price (ACP) for 2007-08. The mills have already started paying Rs 100 per tonne ACP to farmers.
According to industry sources, the government had recently directed the sugar mills in the state to pay Rs 160 per tonne additional cane price to farmers for the year 2007-08, as agreed at a meeting with governor Rameshwar Thakur during the President’s Rule in the state during February last. However, the factories had agreed to pay only Rs 100 per tonne immediately and had expressed their inability to pay the balance Rs 60 per tonne.
Following pressure from the government and agitating farmers groups to pay the balance Rs 60, the mills are now asking the government to exempt them from paying purchase tax so as to enable them to pay the balance Rs 60 per tonne to the farmers. However, it is learnt the state government is in no mood to listen to the mills’ demands and has decided to offer a soft loan to the mills towards the payment of additional cane price. The state cabinet at a recent meeting has decided in this direction and the government order is likely to be issued soon, the sources told Business Standard.
In Karnataka, sugar mills are charged Rs 55 per tonne purchase tax if the percentage of sugar recovery is below 10.5 per cent and Rs 65 per tonne on 10.5 per cent and above recovery. The average works out to Rs 60 per tonne. Considering that the mills crush 22 million tonnes of sugarcane in 2008-09, about 20 per cent lesser than last year, the total amount of purchase tax works out to Rs 132 crore to the state exchequer.
It is believed the government, instead of waiving this amount, is interested in extending soft loans to the mills so that they pay the farmers immediately and pay back to the government later. The exact details of the scheme are currently being worked out by the government, the sources said.