New Delhi: The sugar industry is lobbying against a leaked report of the government’s move to hike the sugarcane price by 8% over the current year by fixing the fair and remunerative price (FRP) of Rs 275 per quintal below which the mills cannot buy the cane from the farmers.

It has already notified the government that the higher sugarcane price will make their operations unviable as it would raise the production cost by Rs 1000-1500 per tonne. The industry says the sugar mills will prefer to shut down than facing the government leash for not paying the dues to the farmers. The mills are already burdened with unsold stock, the industry complained.

It got the hint of the higher sugarcane price from a meeting of Prime Minister Modi with the sugarcane growers from five states, including Punjab and Maharashtra, here on June 29 when he assured them that they would “certainly get higher than the 2017-18 rate.”

 While the Prime Minister has an eye on the 2019 Lok Sabha elections to woo the farmers with better price for the sugarcane, fears have been expressed that it will make the industry burdened with unsold stocks sick.

Besides raising FRP for the farmers, the Prime Minister’s office has already asked the Food and Consumer Affairs Ministry to raise the minimum selling price of sugar fixed at Rs 29 per kg to give some relief to the sugar mills. The industry has been demanding the price of Rs 33/kg in west and south India and Rs 35/kg in north India.

The FRP set by the Centre is the minimum guaranteed price at which the mills in Maharashtra, Gujarat, Karnataka, Madhya Pradesh and Andhra Pradesh pay to the farmers, while the farmers in the key growing states of Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Uttarakhand get the state advised price (SAP) fixed by the state governments which is invariably higher than FRP.

Meanwhile, a group of ministers (GoM), headed by Assam Finance Minister Himanta Biswa Sarma, on Wednesday recommended lowring of the GST on ethanol from 18 to 12 per cent but deferred the decision on imposing cess on sugar.

While the food ministry had suggested imposition of cess up to Rs 3 per kg on sugar, the GoM ruled out any cess on sugar but felt 1% agriculture cess can be levied on the luxury goods to raise funds for the sugarcane growers.

The GoM has not yet received the legal opinion of the Attorney General on legality of levying cess under the GST regime which subsumes all taxes, cess, surcharge and other levies. The AG didn’’t rendered any opinion in view of a case pending in the Supreme Court on cess under the GST regime.

If the Supreme Court ruling is delayed, the GoM will ask the GST Council in its meeting on July 21 to at least lower the GST rate on ethanol.

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