State govt doles out Rs 254-cr sop to sugar mills

MUMBAI: When it comes to helping sugar barons, the state government never runs short of excuses, as state finance minister Jayant Patil showed last week. Mr Patil, a sugar baron himself, made the state poorer by Rs 254 crore by waiving purchase tax for sugar mills in the state.

This time Mr Patil cited “excess production” as a reason to justify his generosity towards the state’s politically powerful lobby of sugar producers. More than half of the ministers in the Vilasrao Deshmukh Cabinet have interest in the sugar sector.

So it’s no wonder that this year’s excess production of sugar cane was a reason enough for the state government to exempt sugar mills from paying purchase tax. The benefit, however, will not be passed on to poor sugarcane growers. Sugar mills, run by politicians, will not pay the purchase tax to the government and will also not pay the growers a higher sum.

Replying to a discussion on budget, Mr Patil said the decision was aimed at providing some relief to the beleaguered industry. According to him the industry currently is beset with the twin-problems of excess sugarcane and falling sugar prices.

Moreover, Mr Patil also made it clear that the sugar factories which have already paid the purchase tax for this year will be compensated for next year. “Due to adverse factors like falling prices it has become difficult for the sugar industry to even pay statutory price to sugarcane growers,” Mr Patil said.

The state sugar federation has welcomed the decision. A representative body of the sugar co-operatives in Maharashtra feels that the sector this year is facing a problem of plenty. With projections of around 726 lakh tonne sugarcane to be crushed during the ongoing season the sector is fearing a glut in the market. The state is expected to pour roughly 80 lakh tonne of sugar in the market in addition to the carry forward stocks of 14 lakh tonne. The state on an average consumes 32 lakh tonne.

With international prices on the decline, sugar producers are left with not too many options. The Centre too last week did its bit to help the sector by announcing creation of buffer stock of 20 lakh tonne. It also offered an export subsidy of Rs 1,350 to Rs 1,450 per tonne to make sugar exports cost-effective.