Closed Sugar Mills Increased To 113

New Delhi: The Government today said the total number of closed sugar mills in the country has increased to 113 this season from 105 last year.

While in a majority of the States, the number of closed sugar mills remained static or rather declined, in Uttar Pradesh, it surged from 14 in 2006-07 to 23 in 2007-08 season, according to the data furnished by the Minister of State for Food and Public Distribution, Akhilesh Prasad Singh, in the Lok Sabha.

In a written reply to a query on steps taken by the Government to revive the closed sugar mills, Singh said it was the responsibility of the entrepreneur concerned to take steps.

Excise Duty On Sugar Raised By Rs 9 A Quintal

Chennai: The Centre has increased the excise duty on sugar by Rs 9 a quintal. The levy will come into effect from March 1 and has nothing to do with the Budget being presented in Parliament on Friday. Budget 2008-09

“The additional duty will now make the total excise levy on sugar at Rs 95 a quintal and together with the special educational cess of three per cent, the burden will be Rs 97.85 a quintal for the sugar mills,” trade sources said.

Actually, the Centre had initially pegged the excise duty at Rs 71 a quintal. Then, following the setting up of the Sugar Development Fund (SDF), it imposed an additional Rs 14 a quintal, thus making it Rs 85. Last month, the levy was further increased by Re 1 a quintal.

Sugar Development Fund

“This levy is not related to the Budget as it is meant for the Sugar Development Fund being managed by Food and Consumer Affairs Ministry. Though the Central Excise authorities collect the levy, part of the collections go into SDF, which is exclusively meant for the industry’s benefit,” the sources said.

SDF is used for extending loans to mills for co-generation power projects, anhydrous alcohol and defraying expenses on internal transport and freight charges. It is also used for maintaining sugar buffer stocks.

Consumers, however, are expected to be unaffected by this additional duty on sugar. “It is demand and supply that dictate price in the sugar market and, therefore, this levy will not cast any burden on the consumer,” the sources said. “Basically, the duty is intended to help the industry,” they said.

With quite a few obligations being met out of SDF, the latest hike is expected to meet the increasing expenditure from the fund.

Interest subvention

This hike, it is learnt, is particularly to meet part of the interest subvention or Government’s financial aid for the mills the Food Ministry has to bear towards payment of cane arrears. In October last, the Government had approved bank loans to the mills, equivalent to the actual excise duty paid by them during 2006-07 and the estimated amount payable in the current year. The interest on these loans with a tenor of five years with a two-year repayment moratorium was supposed to be borne by the Centre.

However, the Finance Ministry came forward to offer only interest subvention of 12 per cent. Of this, five per cent was to be borne by the Finance Ministry and the rest by the Food Ministry. Money for the Food Ministry for meeting this obligation had naturally to come from SDF.

It is learnt that the amount of money available in the SDF has become a cause for concern and, therefore, the Food Ministry decided to impose the additional levy.

According to the trade sources, the increase in the duty was very much on cards after an agreement was worked out on loans for the mills to pay cane arrears.

(As per the Economy Survey tabled in Parliament on Thursday, cane arrears as percentage of the price have increased to 6.2 per cent and outstanding dues have been estimated at Rs 1,830 crore.)

It is felt that the Centre could have avoided such a steep hike at one go and it could have been made in phases.

India Holds Key To Global Sugar Prices

Chennai: India holds the key to global sugar prices, says a report on World Sugar Outlook 2008 by Rabo India Finance Ltd. Run-up to Budget 2008-09

“India currently owns much of the global stocks accumulated since 2005-06 (October-September). If there is not a prompt increase in export offers from India in the face of rallying prices in the first half of 2008, expectations of global export availability for 2008 will be revised downwards, providing fundamental support for any rally,” the report said.

A pruning of India’s projected crop this season to September helped fuel the prices rally last month, though the report said it was not clear how much impact the revision would have on the market.

“As a result, a modest decline in the projected surplus and stocks build-up in 2008 is not, on its own, likely to have much effect on the availability of Indian sugar for export over the next year,” the report said. However, the recent increase in domestic market sales price had made millers cautious on entering new export deals.

Global prices

In January, mills in Maharashtra were able to sell sugar at Rs 12,500-13,000 a tonne in the domestic market against Rs 11,300-11,800 in November.

The latest increase in global prices was also prompting millers to be delay negotiating export contracts and not lock themselves into the existing rates to cover against any upside risk. “Some millers are even trying to wriggle out from delivering against past contracts, though this may invite legal action,” the report said.

Referring to the controversy over higher State advice price fixed by the Uttar Pradesh Government, it said a ruling by the Supreme Court either way could dent the relations between the growers and millers.

Stating that the speed and degree with which India makes more sugar available in the export market would influence the global price rally, the report said a limited response could certainly help to support prices until at least 2008.

Dwelling on supply, demand, stocks and export availability, Rabo said there was little justification for global sugar prices to be substantially higher this year than they were last year. Raw sugar prices may average 12.9 cents a pound in 2009, it said.

With almost all investment funds going long on sugar, their resolve would be tested by market developments, first by expiry of March 2008 raw sugar futures contract and later when Brazil new crop campaign gathers steam. That could lead to volatility in the market, it said.