The government plans to increase sugar cess, which is collected on the sales volume, by Re 1 per kg to fund a subsidy scheme for mills.

The levy would go up to Rs 1.24 from Re 0.24 per kg after an amendment to the Sugar Cess Act is passed by Parliament, sour­ces said. Food minister Ram Vilas Pa­swan introduced the sugar cess (amendment) bill 2015, in Lok Sabha last Friday seeking to raise the ceiling to Rs 2 per kg from Re 0.24.

An enhancement in rate of cess has been necessitated to meet the increasing liabilities and finance interventions to ensure timely payments of cane dues to farmers, according to the statement of objects and reasons in the bill.

“This is just an enabling provision, which will be raised so that government can fix the cess as per requirement,” an official said. The cabinet has approved the hike in sugar cess and it will be notified after the maximum limit is increased in the law, he added.

India’s sugar consumption for FY16 is estimated at 25 million tonnes. Since two months have passed after the beginning of the season on October 1 and the notification may not come before January, sales between January and September may be 18-19 million tonnes, said an expert. The government may collect about Rs 1,900 crore if the cess is increased from January, he added.

The Centre last month approved Rs 1,147 crore su­b­sidy to sugar mills by agreeing to pay the amount to sugarcane farmers on behalf of the companies so that they are able to export 3 million tonnes of the sweetener this season and clear the arrear.

The cabinet committee on economic affairs decided to pay a production-linked subsidy of Rs 4.50 per quintal directly to cane farmers in 2015-16 season (October-September) on behalf of the mills and that will be adjusted against the cane price payable to growers.

The sugarcane arrear of last season has come down to Rs 6,404.85 crore from Rs 21,000 crore in April after a number of initiatives by the Centre. But the food minister declined to specify by when the full amount would be paid saying it’s not possible to give a timeline since it’s an ongoing process and the dues position chan­g­es on fresh supplies received.

He said disbursal of Rs 4,151 crore soft loans to mills has helped in reducing the cane arrears.

The cess, collected from sugar factories, on their sales is deposited in a sugar development fund (SDF) managed by the food ministry The government lends money to mills from SDF at lower interest rates.