Sugar sector may get some respite

After bearing losses due to low realisations and over production, the Government is proposing to offer some relief to the sugar companies. In a positive move, it would allow sugar companies to retain the excise duty payable for 3 years, and to be shown as tax liability on balance sheet.

This effectively means that sugar companies’ losses could be curtailed as the gross realisations would increase by 85 paisa per kg. But how effective this move becomes is doubted as the companies stand to gain from the interest they earn on the excise duty amount, since excise duty needs to be repaid from July, 2010.

Also, much of the excess realisations would go in clearing debt dues and cane arrears. The biggest hope would thus remain if sugar demand increases and companies are able to dispose the excess stock. The sugar sector needs to be regulated so that companies can fix their own prices but given it a politically sensitive issue, it is highly unlikely.

In future, the Government may also impose 10% compulsory blending of ethanol in petrol and include ethanol blending in list of goods of special importance, which may offer huge boost to the sector.

Via: Business Standard