Sugar mills in Uttarakhand are a worried lot, as the long-enjoyed benefit of excise duty exemption has come back to haunt them.
Most of the dozen-odd mills in the state are unlikely to get the succour of a R6,600-crore bailout package announced by the Centre for all producing states last month, as the eligibility for interest-free loans has been tied to the mills’ excise duty payment.
According to the scheme of extending financial assistance to sugar undertakings, 2014, the amount of the loans to clear dues owed to farmers for cane purchases would be equivalent of the ?last three seasons’ excise duty, cess and surcharge on sugar paid by the mill (including notional equivalence for exports or availed Cenvat)?.
Since the Centre had allowed exemption on excise duty payments by mills which were set up between June 2003 and March 2007 for a period of 10 years from the date of starting production, they have paid cess only on sugar. So these mills will be deprived of the relief unless the government tweaks the eligibility criteria. The marketing season for sugar runs from October to September.
Based on sugar output of roughly 3,25,000 tonne a year, mills in the hill state could get slightly less than R100 crore worth interest-free loans if the Centre accedes to change the guidelines in their favour.
Uttam Sugar Mills, Lakshmi Sugar Mills and RBNS Sugar Mills have already demanded that they be extended the interest-free loans as they have not paid excise duty not because of any malicious intention, but as part of the exemption given to industrial units to attract investment in the state.
According to the Indian Sugar Mills Association, sin-ce the basic motive of the Centre is to provide interest-free loans to mills for making cane price payments to farmers, these mills shouldn’t be deprived of the loans just on the ground that they were not liable to pay the excise duty because of the special exemption offered to them. So these mills should be granted the loans on the basis of their notional excise duty, it argued.
The cabinet committee on economic affairs last month approved the bail-out package to the sugar industry to hasten the process of clearing ca-ne arrears. Eligible mills have to repay the loans in five years, with a moratorium on repayment in the first two years.
The interest burden on the loans, estimated at R2,750 crore over the five-year period, will be borne by the Centre from the Sugar Development Fund. The loans would be disbursed through a separate bank account to strictly ensure the utilisation of money.
