INDIA: Maha sugar industry pleased with state budget

Published: 03/20/2017, 11:50:00 AM

Along with its major agrarian thrust, the state budget also brought in cheer for the sugar industry on Saturday, according to the Indian Express newspaper.

Other than talking about interest subvention for micro-irrigation, State Finance Minister Sudhir Mungantiwar also waived purchase tax for the last two years. Purchase tax waiver has been a long-standing demand of the sugar industry. Cooperative mills have been arguing that as they purchase cane from their members, they should not be made to pay purchase tax.

Last year, the ministerial committee had given an in-principal nod for purchase tax waiver for the industry. Mills, which had taken part in the mill-wise indicative export quota (MWIEQ) for the season 2015/16, were given the waiver. This year, however, in view of the short supply of sugar, no such scheme was floated.

Mungantiwar, in his speech, said purchase tax of both 2015/16 and 2016/17 was to be waived. The total waive comes to around INR7 billion (US$107.1 million), which the finance minister hoped will be used by mills to pay the fair and remunerative price (FRP) to the growers.

Millers, however, said the waiver comes at a time when their balance sheet was already drawn up for the year 2015/16. Sanjeev Babar, managing director, Maharashtra State Cooperative Sugar Factories Federation, said the ministerial committee had already given nod for such a waiver, but all mills have not made the provision in the balance sheet.

"The ones who had not made the provision can get it corrected some time later, but it will involve much accounting," he added.

The budget has also discussed interest subvention for farmers going for micro-irrigation of cane. Environmentalists have been vociferous in their criticism of cane, as they said the crop was a water guzzler. While cane is cultivated on around 10% of farm land in the state it consumes 70% of the irrigation resources of the state. Records show that of the 943,000 hectares of cane around 225,000 hectares have come under micro irrigation. Successive state governments have repeatedly pushed to increase area under drip irrigation but have failed to make much headway.

The high investment cost of drip irrigation is often touted as the cause of reluctance of cane growers adopting the same. Interest subvention, it is hoped, will allow for more growers to adopt drip irrigation.