Entry tax fallout: Sugar prices up by Rs 2 per kg

Ruchika M. Khanna

Tribune News Service

Chandigarh, May 21

The price of sugar in the state has gone up by Rs 200 per quintal, or Rs 2 per kg, following the decision of the Cabinet to impose 11 per cent tax on sugar coming into Punjab from other states. The price of sugar (price at factories) in various parts of the state increased from Rs 2,710-Rs 2,740 per quintal till yesterday, to Rs 2,910-Rs 2,940 per quintal.

The retail price of sugar, too, saw a jump immediately, even though the government is yet to issue a notification or bring an ordinance for the imposition of this tax. In the retail market, the prices of sugar too saw a jump of Rs 2 per kg, with prices going up to Rs 30-Rs 34 per kg, in various cities across the state. Industry sources point out that the prices have been increased by unscrupulous sugar traders, who had hoarded sugar and after yesterday’s announcement started selling sugar at a hiked price.

The state’s move to impose entry tax was based more on the concern for the nine cooperative and the seven private sugar mills operating in the state. These sugar mills are running in huge losses and have unpaid dues amounting to almost Rs 700 crore, after Punjab increased its State Advised Price (SAP) on cane to Rs 295 per quintal for the recently concluded cane crushing season. With just 9.5 per cent sugar recovery from cane, the sugar mill owners in the state were claiming that the cost of production of sugar was around Rs 3,500 per quintal. Against this, the price of sugar in the open market was just Rs 2,800 per quintal.

The problem for the state arose because Uttar Pradesh — a main sugar producing state — gave a subsidy of Rs 40 per quintal on sugarcane to all sugar mills, on the SAP of Rs 280 per quintal. As a result, the cost of production of sugar in UP is around Rs 2,800 per quintal, as they were paying farmers just Rs 240 per quintal for sugarcane. Since Punjab, with its annual requirement of 60 lakh tonnes of sugar, gets almost 15 lakh tonnes of sugar from Uttar Pradesh, the cheaper sugar from UP started flooding Punjab’s market. It is basically to protect the domestic sugar industry that the government has decided to impose tax on sugar coming here from other states.

The sugar industry in the state is happy that the government has intervened to protect the interests of the sugar industry. “Our raw material cost is very high and retail prices have dipped. With the new tax being imposed, at least 90 per cent of dues to cane growers can be paid,” said Inderbir Singh Rana, of Rana Sugars.

In December last year, the state government had waived the 3.3 per cent purchase tax imposed on the seven private sugar mills of the state. The nine cooperative sugar mills in the state are already exempt from paying any purchase tax. The government had then reasoned that since other states had waived this tax on cane, they were following suit. The private sugar mills, operated among others by powerful politicians from across the political spectrum, had threatened not to go ahead with the crushing, if they were not bailed out and taxes imposed on them reduced.