These measures would significantly improve the adverse price sentiments in respect of sugar and also boost liquidity of millers, facilitating the clearing up of cane arrears, the government said.
To help cash-starved sugar mills clear dues worth Rs 21,000 crore to farmers, the government today hiked import duty on sugar to 40% and scrapped the excise duty on ethanol made from molasses.
While India imports very small quantity of sugar, the scrapping of excise duty will give the millers Rs 5 per litre extra on ethanol they produce from sugarcane. The customs duty has been hiked from 25-40%.
The decisions were taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, an official statement said. This would prevent any imports in case the international prices of sugar were to depress further, it added.
The Cabinet also decided to remove "excise duty on ethanol supplied for blending". Presently 12.36% central excise duty is levied.
Ethanol produced from molasses generated in the next sugar season (starting October 2015) and supplied for ethanol blending would be exempted from excise duty. Price benefit would be passed on the to the sugar mills/distilleries.
These measures would significantly improve the adverse price sentiments in respect of sugar and also boost liquidity of millers, facilitating the clearing up of cane arrears, the government said.
"Both farmers and state governments had given some suggestions to ensure timely payment of cane arrears. The Cabinet has approved some of them to provide relief to cane growers," Food Minister Ram Vilas Paswan told PTI.
"The government is sensitive towards farmers and understands their problems," he added.
The minister said that no decision was taken on proposal to create buffer stock of sugar, but the issue is under consideration of the government.
Yesterday, Paswan had said that cane arrears stood at Rs 21,000 crore. Of this, about Rs 10,000 crore is in UP alone.
Industry body ISMA said the decision to hike import duty and remove excise duty on ethanol would help the millers only in the long run. It demanded that the Centre should buy 10 per cent of sugar produced this year to help clear cane arrears.
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