Financial Daily from THE HINDU group of publications
Wednesday, Mar 02, 2005
Agri-Biz & Commodities
Industry & Economy - Budget
Sugar industry flays hike in excise duty on molasses
Chennai , March 1
THE sugar industry's reaction has been mixed to the Budget proposals.
While the intention to rejuvenate the industry is seen as a right step in the long term, the Budget has failed to come out with anything concrete, feel industry representatives.
The hike in the excise duty on molasses has uniformly attracted criticism.
According to Mr G. Rajagopal, President, Southern India Sugar Mills Association - Tamil Nadu, a welcome feature was the reference to lower interest rates on loans taken from the Sugar Development Fund.
Though the Budget does not offer specific measures supporting the industry, it had sent the right signal, Mr Rajagopal felt.
However, a disappointing feature was the hike in excise duty on molasses. Ideally, the rate could have been fixed ad valorem instead of a flat rate of Rs 1,000 a tonne citing current prices, which tend to fluctuate.
Sugar industry representatives expressed apprehension that the intention to support the industry should not go the way of proposals made by the previous Governments, and remain only on paper.
Now, following a short-term hike in molasses prices, the excise was being hiked further. In Tamil Nadu, molasses prices were lower than in other States and the sales tax was also calculated at 30 per cent on basic price plus excise.
While the Finance Minister had referred to bringing down interest rates on borrowings, the need is for a clear policy direction rather than mere advice. When mills approach banks for renegotiating loans, these were either rejected outright or huge premiums demanded. There was a systemic mismatch, they said.
The proposals in the Budget appeared to be more relevant to the requirement of the co-operative sector rather than private sector mills, which had been hoping for a helping hand a few years back.
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