Major relief for state sugar factories as the Center decides not to levy tax on salaries above the PRF

In a move that will bring major relief to cooperative and private sugar factories in Maharashtra, the Center has decided to no longer make payments to sugar cane producers, which are above the Fair and Remunerative Price (FRP), taxable.

The decision taken by the Minister of Cooperation Amit Shah, after consultation with the Minister of Finance of the Union Nirmala Sitharaman, will help reduce the cumulative tax burden to the tune of Rs 8,500 crore for 116 sugar factories in Maharashtra. The decision was made on January 7.

The Center’s move came after opposition leader in state assembly Devendra Fadnavis led several sugar baron delegations to meet with Shah in Delhi in September and October last year.

The FRP is the centrally prescribed minimum wage that sugar factories must pay to sugar cane producers to procure cane for processing and for making refined sugar. However, when sugar recovery is higher, factories often pay farmers more than the PRF.

BJP chief executive Radhakrishna Vikhe Patil, whose family has played a major role in the state’s sugar cooperative sector for decades, welcomed the decision. “… It was my late father Balasaheb Vikhe Patil who championed the cause and even brought the case to the Supreme Court for the rights of the sugar mills.”

“Sugar factories that paid higher wages were subject to additional income tax. Now our assertion was that the amount that was paid to the sugar cane growers should be taken as a whole as the amount of our business. Why should sugar factories be forced to pay additional income over an amount greater than the PIF, ”he asked. “The sweets breathed a huge sigh of relief. This was the question we deliberated on during Amit Shah’s visit to Ahmednagar for the December 17th cooperation conclave, ”Patil added.

Former cooperative minister Harshvardhan Patil also welcomed the decision. “The Centre’s decision will mean a total relief of Rs 9,500 crore for sweets across the country. The maximum exemption of Rs 8,500 crore will be for Maharashtra sugar factories … it was a long-term affair, as the sugar factories that came forward to share their profits by paying cane growers more than the prescribed FRP were subject to income tax… ”he said.

The oldest income tax notice to sugar factories on this issue dates back to 1989. Since then, 116 sugar factories in the state have been struck in the past two to three decades. The pending tax amount in Maharashtra was Rs 8,500 crore and the sugar factories often complained that it was not possible for them to refund such a huge sum.

Recently, NCP Chairman Sharad Pawar also met with Union Cooperation Minister Shah and discussed several reforms aimed at consolidating the sector and making sugar factories more sustainable. Besides the tax exemptions, the sugar factories now hope the Ministry of Cooperatives will help them streamline cooperative banking systems across the country, including Maharashtra.

An official from the state cooperative department said, “We welcome the Centre’s decision. The case fell within the competence of the Center. It was not within our jurisdiction.

Rachel J. Bradford