GoM moots cess on sugar, subsidy for cane farmers 

30 April, 2018

Imposition of a cess on sugar production subsidy to sugarcane farmers and reducing goods and services tax on ethanol are some of the suggestions put forward by a group of ministers headed by Nitin Gadkari that is looking into the rising sugarcane arrears.

Sugar arrears to be paid to farmers by sugar mills has touched close to Rs. 20,000 crore, says the industry.

Sugar mills say they are unable to pay farmers due to a fall in sugar prices in the domestic market. Sugar production is up almost 50% at 30 million tonnes this season, said the industry.
“Some of the important suggestions from are that we want to give production subsidy (to farmers). Secondly, sugar cess should be imposed, and third, GST on ethanol should come down to 5%. We will decide on these suggestions,” said Ram Vilas Paswan.

Food ministry officials said that rather than cess, the GST Council can impose duty on sugar which can be earmarked for the sugar development fund. The fund will help farmers get payments if the market price falls below the benchmark rate fixed by the Centre.
They also said the government was exploring a reduction in ethanol price by reducing 18% GST levied on it and mandatory purchase by the petroleum ministry.

In 2015, the government had decided to provide a production subsidy of Rs. 4.50 per quintal of cane crushed to offset cane cost. The subsidy was paid directly to farmers on behalf of the mills and adjusted against the cane price payable to the farmers towards fair and remunerative price (FRP) including arrears relating to previous years.

Sugar mills are asking for subsidy after food ministry recently said mills will have to compulsorily export 2 million tonnes in the next few months owing to the surplus sugar in the country.

With global sugar prices down due to excessive supply, Indian mills don’t find themselves competitive in the global market. In the domestic market, too, sugar prices continued to trade lower following extended selling pressure by millers with excess domestic supplies and poor demand from bulk consumers.

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