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Government accepts sugar industry's demands, but says mills must first assure payment to farmers

India will raise import duty on sugar to 40% from 15% & will consider other incentives for mill owners if they clear dues owed to farmers, food minister said.

, ET Bureau|
Updated: Jun 23, 2014, 04.08 PM IST
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Export sop for sugar cos; outlook by experts
NEW DELHI: The government has agreed to accept most of the sugar industry’s demands including a nearly three-fold increase in import tax and support for exports, but asked mills to first give an assurance on clearing their arrears to sugarcane farmers.

At an inter-ministerial meeting on Monday, the government has decided to increase the import duty on sugar to 40% from the current 15%, agreed to continue with the subsidy of Rs 3,300 per tonne on sugar exports until September and also gave the go-ahead to 10% ethanol blending in petrol.

Food Minister Ram Vilas Paswan said the government would implement these measures only after sugar mills give it in writing that they would pay their arrears to farmers, totalling as much as Rs 11,000 crore at present.

Putting the onus of implementing the reforms sought by the industry back on them, Paswan said: “We are ready to execute these reforms as soon as possible. If the industry gives in writing today, we will put in execution whatever we have announced by today. It all depends on the industry now by when can they pay the farmers, they will receive the aid accordingly.”

The decision to accept the demands of the industry to help it recover from financial crisis was taken at a meeting of the ministries of food and agriculture, oil & natural gas, commerce and transport. It was also attended by the cabinet secretary and representatives from the top two sugar producing states, Uttar Pradesh and Maharashtra.

“The food secretary would call for a meeting soon with the representatives of the sugar industry wherein they would have to give a written assurance that they would clear the outstanding dues to the cane farmers,” said Paswan.

The previous government had announced a bailout package for the sugar industry which included an export subsidy of Rs 3,300 per tonne for the shipment of up to 4 million tonnes of raw sugar. It had also recommended for 10% ethanol blending from current 5%. The sugar industry, which supplies ethanol to oil marketing companies, has been pushing for an increase in ethanol blending in petrol to 15%.

ET reported last week that the ministry of petroleum and natural gas was looking to cap ethanol blending at 10%.

The industry welcomed the government’s decision. “Paying the farmers is our topmost priority as well. If they want it in writing, we would give it,” said Abinash Verma, director-general of the Indian Sugar Mills Association. “It is no doubt that it’s welcome move by the government to bail out the sugar industry.”

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