Govt plans to hike sugar cess by Rs 100 per quintal

Won't lead to increase in retail price as cess would be charged only when prices are low

The Union government plans to increase the cess on sugar by almost Rs 100 per quintal to fund its ambitious programme of paying Rs 4.50 per quintal directly into the bank accounts of growers.

The Sugar Cess (Amendment) Bill, 2015 was introduced in the Lok Sabha this week by Food Minister Ramvilas Paswan which would give powers to the Centre to raise the ceiling on such a cess from the existing Rs 25 per quintal to Rs 200 per quintal.

At present, the central government levies a sugar cess at the rate of Rs 24 per quintal, while the ceiling was at Rs 25.

The amendment to the Act will enable it to raise the actual cess to Rs 124 per quintal as then the ceiling or the power to impose it would be limited to Rs 200 per quintal.

Officials said the government plans to garner around Rs 2,500 crore by the increasing the cess, which would be sufficient enough to cover the expenses that it would incur on transferring the production incentive of Rs 4.50 per quintal estimated to be around Rs 1,147 crore per year.

However, sources said hefty Rs 100 per quintal increase in sugar cess levied by the government on sugar might not lead to an increase in retail prices, as the cess would be collected only when the retail prices are low.

The direct production-linked incentive would also be transferred into the bank account of farmers only when prices are low and mills are not able to pay the growers.

"An enhancement in rate of cess has been necessitated to meet the increasing liabilities and finance interventions to ensure timely payments of cane dues to farmers," the Bill to amend the Act tabled in Parliament said.

Last month, in a landmark move, the Union Cabinet Committee on Economic Affairs (CCEA) decided to pay a production-linked subsidy of Rs 4.50 per quintal directly into the bank account of sugarcane farmers for the 2015-16 season that started from October.

The step would also enable the cash starved millers to clear their dues accruing to the growers as they would now have to pay that much less from the fair and remunerative price (FRP) of Rs 230 per quintal. The mills still own around Rs 6,500 crore to the farmers.

A back-of-the-envelope calculation shows that assuming the average per hectare sugarcane yield in the country at around 700 quintals, each sugarcane growing farmer family in India could stand to gain slightly more than Rs 2,000 directly from the Central government this season.

The central government's subsidy burden on the move would come to around Rs 1,147 crore, which has now been decided to be adjusted by increasing the sugar cess. The fund generated by raising the cess would be included into the Sugar Development Fund.

CESS ON SUGAR

• Centre plans to increase cess on sugar sales by Rs 100 per quintal
   
• At present this cess is charged at the rate of Rs 24 per quintal.
   
• It had sought Parliament nod to increase the ceiling on sugar cess to Rs 200 per quintal as against the current ceiling of Rs 25 per quintal
   
• Without raising the ceiling the government can't increase the actual cess
   
• It plans to generate around Rs 2,500 crore to fund its subsidy programme that would cost Rs 1,147 crore
   
• No increase in retail price is seen as cess would kick in only when retail price drops.