Giving some relief to the cash strapped sugar sector, the government has hiked import duty on sugar to 40 percent and scrapped the excise duty on ethanol made from molasses. The government has said that 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. Though, India imports very small quantity of sugar but the move will help sugar mills clear dues worth Rs 21,000 crore to farmers.
The scrapping of excise duty will give the millers Rs 5 per litre extra on ethanol they produce from sugarcane. The Cabinet also decided to remove central excise duty on ethanol supplied for blending, presently being levied at 12.36 percent. 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.
Apart from hike in import duty and removal of excise duty on ethanol, the government has also decided to withdraw the 'Duty Free Import Authorization' scheme (DFIA). Under this, exporters of sugar could import permissible quantities of raw sugar without any duty for subsequent processing and disposal. The withdrawal of the scheme will prevent leakage of sugar made from such duty free imports in the domestic markets.
The government has said that decision to raise the customs duty is aimed at preventing any imports in case international prices of sugar were to depress further, however Industry body ISMA said that the decision to hike import duty and remove excise duty on ethanol would help the millers only in the long run and demanded that the Centre should buy 10 percent of sugar produced this year to help clear cane arrears.
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