Bitter Sugar

Lucknow The state government’s decision to ban refining of imported raw sugar has boomeranged. With the Centre allowing sugar mills to process the imported raw sugar outside the state on Wednesday, the Uttar Pradesh government stands to lose an estimated Rs 1,000 crore in taxes.

In all likelihood, Uttar Pradesh’s loss is going to be Maharashtra’s gain since most of the raw sugar will be refined there, sources in the industry said.

The self-inflicted blow comes at a time when the state’s financial health is grim.

The government has taken several austerity measures to cut down wasteful expenditure and — for the first time in two decades — did not pay bonus to its employees last year.

State sugar mills had imported as much as 20 lakh metric tonne of raw sugar. Most of this is lying in godowns at Kandla port since the government banned movement of raw sugar in the state, bowing to the demand of farmers who feared it will lead to a fall in the price of sugarcane.

The government will lose money that it would have otherwise got as entry tax, sugar cess, administrative fee on molasses and share in central taxes like excise duty and service tax.

Of the total Rs 97.13 levied on each quintal of sugar produced in UP at the factory gate, Rs 71 is central excise, Rs 24 is the sugar cess which goes to the state exchequer and the balance is the education cess — which too goes to the Centre. The Centre will get its share wherever the raw sugar is processed, but the state will be hit.

Then there is a two per cent entry tax on the invoice amount of sugar sold within the state which the government will lose. It will also lose an administrative fee imposed at the rate of Rs 11 per quintal on molasses and three per cent VAT on this by-product.

The Indian Sugar Mills Association (ISMA) and sugar mills in the state have welcomed the Centre’s decision. “The Centre had no option. We welcome the decision, though it will add to our cost. It has come at the right time and is in the interest of both the industry and consumers,” said C B Patodia, an office-bearer of ISMA.

Gopal Maheshwari, president of the Kanpur Sugar Merchants Association — the biggest market in UP — said: “I am not aware of the loss to the state exchequer, but the state government’s decision was not in the interest of sugar industry, sugar trade and consumers.”

source: expressindia