Run-up to the Union Budget 2002-03: Sugar industry
Background
India is the largest consumer and the second largest producer of sugar in the world. At the beginning of each crushing season, the Government fixes the statutory minimum price (SMP) for sugarcane, which is the main input for sugar.
Since sugar is a controlled commodity under the Essential Commodities Act, 1955 & Sugar Control Order, 1966, all sugar producers have to surrender 15% of their production to the Government for distribution through the Public Distribution System (PDS).
The surrendered sugar is known as Levy Sugar, the price of which is fixed by the Government and is generally lower than the cost of production.
The government has given approval to following three exchanges to conduct futures/forward trading in sugar:
1) e-Commodities Ltd, Mumbai
2) NCS Infotech Ltd, Hyderabad
3) e-Sugar India, Mumbai
Key Input Sugarcane
Duty Structure
Product
Excise Duty
Customs Duty
(Basic)
Levy Sugar
Rs 52 per quintal
60%
Free sale sugar
Rs 85 per quintal
60%
Sugar Confectionery
16%
35%
Molasses
Rs 500 per MT
15%
Major announcements made in previous year's budget
Futures/forward trading in sugar industry was introduced.
Sugar would continue to be supplied under the Public Distribution System in Special Category States, Hill states, Island Territories and to Below Poverty Line families in other States and Union Territories, even after complete decontrol is accomplished. This would be in the interest of people belonging to the lower income group.
Industry's demands from Union Budget 2002-03
Currently excise duty on sugar boiled confectionery is levied at 16%. Since the price of this product is within a range of 25 paise to Re 1, it becomes very difficult to pass on the levy to customers, resulting in the sugar industry absorbing the cost. CII has therefore recommended reducing the excise duty on sugar confectionery priced less than Rs 2, from 16% to 8 %.
Excise duty on molasses should be levied ad valorem @ 16%.
Research & Development and extension services for the sugarcane farmers should be given emphasis.
In addition, CII expects its following demands raised in the previous budget to get the Finance Minister's attention this year:
Sugar produced in 2001-02 should be fully decontrolled.
Sugar for PDS or targeted PDS should be procured through an open tender.
Molasses distribution should be decontrolled and state policies on this co-product should be uniform.
Sugar cane pricing board should be set up with representatives from industry and the government.
