Karnataka directs sugar mills to pay cane arrears before Nov 30

Govt has offered to exempt them from purchase tax, road cess, VAT amounting to Rs 78 a tonne for 3 yrs

The Karnataka government directed sugar mills in the state on Wednesday to announce a plan by Sunday to clear their cane payment arrears to farmers for 2013-14, amounting to Rs 1,803 crore. And, to begin crushing of cane for the current year by the same date.

The arrears amount to Rs 400 a tonne for the 2013-14 season. “We have told mills to start crushing immediately and pay farmers Rs 200 a tonne for cane within a month and the balance Rs 200 a tonne over two years. In return, the government will exempt mills from payment of purchase tax and value added tax, amounting to Rs 78 a tonne, for the next three years, including the current year,” H S Mahadeva Prasad, minister for cooperation and sugar, told reporters.

The minister had met representatives of sugar mills for the past two days. “If mills fail to meet the government deadline of November 30, (we) will take over factories and start crushing,” he said.

The government had announced a State Advisory Price (SAP) of Rs 2,500 a tonne for 2013-14, as against the ‘Fair and Remunerative Price’ (FRP) of Rs 2,100 a tonne suggested by the central government. However, mills refused to pay, stating their cost of production was much higher than what they'd get for the sugar. Some paid the SAP and others paid the FRP. The balance at Rs 400 a tonne had cumulated to Rs 1,803 crore.

The mills argued they could realise only Rs 27-28 a kg for sugar, as against a cost of production of Rs 32 a kg. Tushar Girinath, secretary of the department of commerce and industries, said the government had decided to exempt mills from the payment of purchase tax of Rs 50 a tonne, road cess of Rs 5 a tonne and Rs 28 a tonne of value added tax.

“We have told mills to come out with a credible instalment (payment) plan within a month. Also, if they do not resume crushing, the government will take over and make arrangements to start crushing. It is a good bargain for the mills because they do not have to pay these taxes for the next three years. We hope they will abide by the government’s decision,” he said. Currently, only 30 of 60 mills in the state are crushing cane, having done three million tonnes by now. Of these, only four mills have made full payment to farmers, the minister added.

The Karnataka Sugarcane Growers’ Association had urged the government to take over the defiant mills and ensure payment of arrears at the earliest. They had also demanded payment of 15 per cent interest with the arrears, which does not seem to be a part of the final decision.