Government raises import duty on sugar, removes excise tax on ethanol for blending

NEW DELHI: The government on Wednesday announced a number of measures for the sugar industry to ensure clearing of arrears totalling more than Rs 20,000 crore to sugarcane farmers as well as to improve sentiment and liquidity in the industry.

As part of the steps, the government increased import duty to 40% from current 25% and withdraw duty free import of raw sugar. Both measures are aimed at curbing supplies from overseas. It has also removed a 12.36% excise duty levied on ethanol supplied for blending with petrol.

“The government has, from time to time, provided financial assistance to the industry to overcome liquidity constraints such as providing interest free working capital loans and incentives for raw sugar exports. However, due to adverse price sentiments plaguing the sector, problems of cane dues arrears persist. Hence we are announcing a slew of measures for the sector,” the food ministry said in a press release.

Sugar producers need to pay government-set prices for cane procured from farmers. The mills say the because of a fall in sugar prices, they are unable to pay farmers. Their arrears to cane farmers totalled Rs 20,099 crore as on March 31.

The duty-free import authorisation scheme for raw sugar has been withdrawn to prevent leakages in the domestic markets, the ministry said. Under the duty-free scheme, refiners were allowed to import raw sugar, which had to be processed and then exported.

The period for completing export obligations under the advanced authorisation scheme would be reduced to six months, so as to prevent the possibility of any leakage into the domestic markets, the ministry said.

Ethanol produced from molasses generated during the next sugar season and supplied for blending would be exempted from excise duty and the price benefit would be passed on the to the sugar mills and distilleries, said the press release.