Finance Ministry likely to abolish sugar cess in budget 2017

As part of the exercise to move towards the uniform goods and services tax (GST), the Finance Ministry is likely to abolish sugar cess in its forthcoming budget. The sugar cess is a levy which forms corpus of the Sugar Development Fund (SDF) and is used for modernisation and expansion of mills.

The Centre is levying the cess, collected as an excise duty, of Rs 124 per quintal on the sweetener produced by any factory in the country. It was raised substantially from Rs 24 per quintal only last year. The cess, collected from sugar mills, is deposited in Sugar Development Fund (SDF) managed by the food ministry. The fund is used to lend money to mills at lower interest rates.

According to sources, various kinds of cess and surcharges are levied on goods and services. The finance ministry wants to subsume some cesses under GST, which is why it has proposed to do away with the sugar cess under SDF. Some cesses would continue as funds collected will be used to compensate states for any losses incurred after GST is rolled out, the sources added.

Meanwhile, Food Minister Ram Vilas Paswan has written to Finance Minister Arun Jaitley to consider transfer of Rs 2,880 crore expected to be collected as sugar cess during 2016-17 in SDF. Paswan has also suggested that budgetary allocation be made to SDF in the event of abolition of sugar cess which is an important funding source for running subsidised programmes for mills.

SDF was set up in 1982 to provide financial help for development of sugar industry. Since inception, about Rs 7,500 crore has been disbursed to sugar factories. The food ministry has further sanctioned SDF loans of Rs 865 crore for disbursement in 2016-17 and 2017-18. In recent years, SDF has been used to finance various interventions of the government to deal with the crisis in the sugar industry.

The country’s sugar production is estimated to be lower at 22.5 million tonnes in the 2016-17 marketing year (October-September), as against 25.1 million tonnes in 2015-16.