New Delhi: Government's decision to hike import duty on sugar and remove excise duty on ethanol will help millers only in the long run and it should buy 10 percent of the sweetener produced this year to help clear cane arrears, sugar industry body ISMA said on Wednesday.
"The decision to remove excise duty on ethanol would increase net realisation to sugar mills by around Rs 5 per litre of ethanol, which should incentivise some mills to divert 'B' heavy molasses or cane juice into ethanol which will reduce some surplus sugar production from next year," Indian Sugar Mills association (ISMA) Director General Abinash Verma said in a statement.
While he hailed the government's decisions to hike import duty on sugar to 40 percent from 25 cent and also remove excise duty on ethanol, Verma said the benefits of both these decisions would be realised by the industry in the long run.
"The immediate need to reduce the surplus of 35 lakh tonnes of sugar blocking almost Rs 10,000 crore of cash flows and the need to improve the current ex-mill sugar prices which are at its lowest in the last 6 years will not get addressed by the above decisions," Verma said.
The ISMA DG said the Centre should "quickly decide" on the industry's request to buy-out 10 percent of current year's sugar production.
"Only this step will help the industry come out of the crisis in the short run and ensure that a major portion of cane price arrears of farmers are cleared before the start of the next sugar season," Verma said.
Cane arrears to farmers have touched Rs 21,000 crore as sugar mills are facing difficulty in making payments due to low sugar prices and high cost of production.
Sugar output is estimated to cross 27 million tonnes in the 2014-15 marketing year (October-September), as against 24.3 million tonnes in the previous year. The annual domestic demand is about 24.8 million tonne.
To bail out the cash-starved sugar industry, the Centre had in August last year hiked the import duty on both raw and refined sugar to 25 percent from 15 percent. In February this year, it provided a subsidy of Rs 4,000 per tonne for the exports of 1.4 million tonnes of raw sugars.
