New Delhi: The Planning Commission has opposed elements of a relief package proposed by the food ministry for sugar producers, especially those that moot tax dues be deferred. In doing so, the apex panel has echoed the views of the finance ministry, which is also opposed to the fiscal sops.
A group of ministers (GoM) is to meet on Tuesday to discuss the proposals put forward by the department for food and public distribution, or DFPD, which is part of the food ministry, aimed at helping sugar companies struggling with losses in an industry that has regulated raw material prices.
“We are not in favour of supporting the proposal forwarded by DFPD to allow sugar mills to retain for three years the amount of Central excise duty on non-levy sugar beginning August 2007. This may lead to similar demands from other industries,” said a Planning Commission official who did not wish to be identified. Non-levy sugar refers to the sugar sold in the open market and not through the public distribution system.
DFPD had suggested repayment of retained duty in monthly instalments in three years from July 2010. The move is designed to help lessen the burden of bank dues accrued on account of payment of cane price arrears to sugar cane farmers. The amount involved in deferring Central excise duty would be to the tune of Rs2,875 crore. The department of revenue has already said there is no provision under the Central Excise Law.
Two bumper sugar cane crops have increased the production of sugar leading to sagging prices for the commodity. But sugar producers are still required to pay state-fixed rates for sugar cane, aimed at protecting farmers. With production at 27 million tonnes, the average price of sugar across the country is Rs1,250 a quintal, which is Rs400 lower than the average cost of production.
The food ministry also wants the government to treat income-tax liability of sugar mills in the first three years of retaining the Central excise duty as deemed payment under income-tax rules. The Planning Commission has said it will support the revenue department, which has made clear that the Central Board of Direct Taxes does not have the powers to allow such a coverage.
The GoM, headed by external affairs minister Pranab Mukherjee, has Planning Commission deputy chairman Montek Singh Ahluwalia, minister of agriculture, food and consumer affairs Sharad Pawar and finance minister P. Chidambaram as members. The commission also wants financial institutions and banks to be party to a debt recast package for private sugarmills as proposed by the food ministry.
Another proposal requires that a moratorium on loans from the Nabard, due to expire this year, be extended until 2010. The package, announced in 2005, included rescheduling term loans and lowering interest rates to benefit mills. So far, 103 sugar mills have availed of this and the estimated interest subsidy of Rs525 crore is to be borne by the Union government.