Reeling under the steep fall in sugar prices in the open market to below the levy price level, sugar producers in Andhra Pradesh have appealed to the state to prevail upon the Centre to scrap excise duty on sugar and molasses. It has also sought a two-year reprieve from paying cess to the Sugar Development Fund.
In a memorandum to the commissioner of sugar and cane, the state unit of the South Indian Sugar Mills Association (Sisma) said the steep fall in sugar prices in the open market had eroded the cane price-paying capacity of sugar factories.
The association said the revised statutory minimum price (SMP) for sugar factories in the state with an average peak period recovery of 10.2 per cent works out to Rs 835 per tonne of sugarcane.
To support this level of SMP, after taking into account all other costs, the ex-factory sugar price should prevail at around Rs 1,550 per quintal, it observed.
At the current price level of Rs 1,050 to Rs 1,140 per quintal of sugar (as compared with the levy price of Rs 1,250 per quintal), the sugar cane price-paying capacity of the mills works out to only Rs 617 a tonne of cane at a recovery rate of 8.5 per cent, the association felt and added that it would be even lower in the case of new factories with higher term loans and interest burden.
R S Bhalerao, the secretary of the AP chapter of Sisma, felt the situation was not likely to improve in the near future due to surplus sugar stocks.
In fact, Sisma filed petitions in the High Courts of Andhra Pradesh, Tamil Nadu and Karnataka against the central government on the issue of SMP price, he said.
The sugar mills, currently, contribute an amount of Rs 140 a tonne of sugar as cess to the Sugar Development Fund.
The association feels that exemption from paying this cess at least for two years will not have any adverse effect on the working of the fund in view of the Rs 1,175 crore credit balance available with it at national level as on June 30, 2002.
The basic excise duty on sugar is levied at the rate of Rs 340 a tonne. The association felt the Centre should permit factories to collect the basic excise duty but retain the same with them at least for two years.
Similarly, molasses, a by-product of sugar mills, attracts an excise duty of Rs 500 a tonne. Sisma has asked for a similar relief on this to improve the cash flows of the sugar factories.
