Revenue dept opposes sops to sugar units

The department of revenue and the Planning Commission have rejected two key proposals of the recently proposed sops for the sugar industry.

The two are of the view that the law does not provide for deferment of duty or income-tax relief and that these concessions will lead to similar demands from other industries.

The department of food and public distribution had last month proposed that the sugar companies be allowed to retain, on an interest-free basis, the Central excise on non-levy sugar collected from August 1, 2007, for three years.

This was to enable the companies to pay the arrears to the farmers. It had also proposed to treat the income-tax liabilities of sugar mills for three years as deemed payment under the Income Tax Act, 1961.

However, the revenue department has pointed out that the excise deferment will cost the government Rs 2,875 crore. The department has also said that under the existing law, neither the government nor the Central Board of Direct Taxes has the power to provide the proposed income-tax concession.

The package is scheduled to be taken up at a meeting of a group of ministers (GoM) headed by External Affairs Minister Pranab Mukherjee tomorrow.

The GoM was set up after the Cabinet Committee on Economic Affairs (CCEA) approved the food department's proposal to create an additional buffer stock of 30 lakh tonnes, with the cost being met from the Sugar Development Fund.

All other proposals, including the excise and income-tax measures, as well as the extension of the Nabard package by three years up to April 2010 and a debt restructuring package for private sugar mills, were referred to the GoM.

The ministers' group is likely to give an in-principle approval to re-work the Nabard package and extend it to cooperative sugar factories.