Sugar mills seek removal of 20% levy in Budget

The Indian Sugar Mills Association (Isma) has urged government to withdraw the 20 per cent levy in the new season starting October 1 and also discontinue with its policy of exempting imported sugar from stock holding limits.

In its memorandum ahead of the Union Budget for 2010-11 (April-March), the association said, weekly despatch mechanism for sugar mills and concessions provided to encourage bulk consumers to use imported sugar have put the local industry at a disadvantage.

To rein in prices of sugar, the government had directed mills to sell the February open market sugar sale quota in four weekly installments and tightened stock holding limits for locally sourced sugar for bulk use, making it easier for big consumers to rely on imports.

“We suggest rollback of regulatory measures... and withdrawal of levy obligation from the ensuing sugar season 2010-11,” the body said.

Under the levy mechanism, it is mandatory for sugar mills to sell a fifth of their total output to state-run fair price shops at an average price of Rs 13.22 a kg.

The government had raised levy obligation of sugar mills to 20 per cent of their total output from 10 per cent with effect from October 1 to ensure adequate supplies of cheap sugar for poor.

Isma urged the government to dismantle levy and monthly quota mechanism to reduce volatility in prices.

In its memorandum, the body also urged the government to extend tax exemption to co-generation power units of sugar mills for five years till March 2015.

Co-generation power projects set up by sugar mills are entitled to a 10-year tax break provided power generation from such units starts before the close of the current financial year.

Isma said under the proposed Direct Tax Code, the government plans to levy Minimum Alternative Tax (MAT) on manufacturing companies at an ad valorem rate of 2 per cent on the value of the gross assets as on the close of the financial year.

“Since sugar industry is a seasonal industry and its inventory build-up is normally the highest on March 31. Sugar companies would be compelled to pay tax on a peak inventory level, putting the industry to a great loss,” Isma said.

It urged the government to revert the tax base of MAT to book profits with adjustments for MAT credit or exempt sugar stocks while computing the asset base, or lower MAT to 0.25 per cent.

The association also reiterated its demand to include ethanol under the definition of declared goods to limit tax on it to 4 per cent.

It also sought re-introduction of Re 0.30 per litre excise rebate for ethanol blended petrol, which was valid during 2002-04.