The Hindu Business Line : TN levies, controls leave sugar mills bitter

DESPITE prospects of upswing for the sugar industry, sugar mills in Tamil Nadu are concerned over the State Government levies and regulations act that are tending to be a dampener.

Cane acreages are on the increase, cane output is expected to touch a high of over 190 lakh tonnes and the current season, though delayed by rains, is expected to be a good.

But, according to leading sugar mills, there are issues that have long been left unaddressed, such as high purchase tax on sugarcane (see table), high tax and controls on movement of molasses that artificially keep its prices low. These affect the mills in the State.Also, some proactive measures such as encouraging drip irrigation would go a long way, they said.

Due to the tax regime, mills in Tamil Nadu are at a disadvantage compared to their competitors in Maharashtra, Uttar Pradesh and Andhra Pradesh. The mills have represented the issue through the South Indian Sugar Mills Association to the State Government.

For instance, Tamil Nadu levies a purchase tax of Rs 60 a tonne of sugarcane apart from a turnover tax of Rs 28 a tonne. In other States, there is no turnover tax and purchase tax is lower or passed on to farmers as a part of the sugarcane price, sources said.

In 2005-06, the sugarcane price in Tamil Nadu is Rs 1,075 a tonne against Rs 1,050 in Uttar Pradesh, Rs 950 in Maharashtra, and Rs 935 in Andhra Pradesh. The taxes have driven up the cane costs further, according to the mills.

Sugar price on the other hand are ruling lower at Rs 16,000 a tonne in Tamil Nadu against Rs 16,500-17,500 in the other States.

Molasses, the by-product of sugar production and a raw material for ethanol, is a heavily controlled product. Sales tax on molasses in Tamil Nadu is 30 per cent against 2-4 per cent in Uttar Pradesh, Maharashtra and Andhra Pradesh.

Such controls result in low prices. For instance, molasses in Tamil Nadu now fetches about Rs 1,000 a tonne against double the amount in other States.

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