The recent ad hoc hike of sugarcane prices by Rs 5 a quintal will put an additional burden of Rs 1080 crore on the sugar industry which is already struggling to cope with heavy inventories and falling prices.
The cane price hike was announced recently by Prime Minister Atal Bihari Vajpayee as a drought relief measure for the farmers. This increase was over and above the usual annual hike in the minimum support price of sugarcane.
Indian Sugar Mills Association (ISMA) president SV Balasubramaniam has urged the government to allow sugar factories to retain for two years all taxes on sugar and molasses, including the basic excise duty, and the Central Cess on sugar which is credited to the Sugar Development Fund to bail the industry out of this crisis.
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He pointed out that in the past, too, the industry was permitted to retain excise levy to encourage creation of new sugar production capacity in a situation of controlled costs and prices.
To the extent of the new capacity created by way of expansion or installation of new units, sugar mills were then allowed to charge and retain the excise duty to compensate them for the high capital cost incurred by them. He has urged the government to frame and implement a similar scheme now.
He, however, welcomed the government