The sugar industry, which has been faced with falling sugar prices amid a fifth surplus year, has welcomed the Government move to remedy the situation by removing the 12.5 per cent excise duty on ethanol and hiking the import duty on sugar to 40 per cent from 25 per cent.
The decision to remove the excise duty on ethanol would increase the net realisation to sugar mills by around Rs.5 a litre of ethanol, which should incentivise some mills to divert ‘B’ molasses or cane juice into ethanol, which will reduce some surplus sugar production from next year.
“Benefits of both these decisions would be realised by the industry in the long run,” Abinash Verma, Director General, Indian Sugar Mills Association (ISMA) said in a statement.
He said the immediate need was to reduce the surplus of 3.5 million tonnes of sugar blocking almost Rs.10,000 crore of cash flows. There was the need to improve the ex-mill sugar prices, which are at its lowest in the last six years and will not be addressed by the above decisions.
ISMA expects mills to produce 27 million tonnes in the current season (ending September 2015), a surplus of 2.2 million tonnes over estimated consumption and a closing balance by then of 9 million tonnes. The industry carries three months consumption, totalling 6 million tonnes so the surplus would be in the region of 3 million tonnes.
ISMA has been pushing for the creation of a 3 million tonne buffer that would take care of the surplus sugar as also reduce the distress levels and help sugar prices to recover.
“We would urge the government to quickly decide on our request to buy out 10 per cent of our current year’s sugar production,” Mr. Verma said. “Only this step will help the industry come out of the crisis in the short run and ensure that a major portion of cane price arrears of farmers are cleared before the start of the next sugar season.”
