Group of ministers reluctant to tinker with sugar pricing mechanism
15 Sep 2007
The
group of ministers on sugar do not seem to be keen to
tinker with the pricing mechanism and the only reason
to cheer may be a cut in customs duty on molasses, though
a final call is awaited, reports CNBC TV18.
Sugarcane farmers have reason to smile. The group of ministers
on sugar has shot down a proposal by the ministry of agriculture,
to link the price of sugarcane to the price that sugar
mills get for selling sugar in the open market. The group
of ministers said that the current pricing arrangement,
where the government fixes the minimum support price for
sugar, should continue. This move also makes political
sense ahead of elections.
The ministers group feels that it may not be possible
to give appropriate signals to farmers through the minimum
support price mechanism. Therefore, the current MSP mechanism
should continue.
And
things just got a little bitter for sugar mills reeling
under big losses.
Sugar mill owners want the government to give excise relief
to them, for three years, in order to help them clear
bank loans and dues to the sugarcane farmers. The amount
involved is Rs2,875 crore, but the finance ministry has
shot it down saying that there is no provision in the
central excise act to provide such relief.
But there is also some cheer for the sugar industry. The
group of ministers is planning to reduce customs duty
on molasses from 10 per cent to 5 per cent, but only when
ethanol blending is made mandatory.
Industry
sources, however, say this is not enough to bail out an
industry reeling under huge financial burden, with the
recent glut in sugar stocks in India. With international
sugar prices also on the downswing, there seems to be
a bitter year ahead for the industry, but the GoM will
soon take a final call.