The National Federation of Cooperative Sugar Factories has requested the government to do away with the goods and services tax on the sweetener to improve lifting at wholesale and retail levels, which in turn will help increase liquidity of mills, a senior industry official said.
“The need of the hour is to come out of the acute liquidity crunch,” Managing Director of National Federation of Cooperative Sugar Factories Prakash Naiknaware said.
Currently, sugar attracts 5% of GST. The federation has also sought a reduction in GST on molasses to 12% from 28% presently.
Mills are having a tough time as sales have fallen in wake of the lockdown, imposed to curb the spread of COVID-19, and cane dues to farmers are piling up. The industry expects a decline in annual demand for the sweetener by at least 2 mln tn due to the lockdown.
“Millions of sugarcane farmers are waiting too long to receive payments for the cane delivered by them to sugar mills. Mills on their part are helpless because they do not have cash liquidity,” the official said.
As of Monday, mills in Uttar Pradesh, the top producer, owed over 142 bln rupees, and those in Maharashtra, the second largest producer, owed over 7.8 bln rupees in cane dues to farmers for the 2019-20 (Oct-Sep) season, data by the government showed.
Recently, the Uttar Pradesh government had asked farmers to take 100 kg of sugar every month till June in lieu of cane payments if they are in urgent need of money.
Farmers, however, are not keen on accepting sugar. For one, most farmers do not have space to store so much sugar. Secondly, where would they find takers for this sugar, when mills themselves are struggling to sell their stock.