VAT rebate for sugar mills raised to 90pc
Kathmandu, August 4
The government has raised the value added tax (VAT) rebate for sugar mills from 70 per cent to 90 per cent from this fiscal to encourage domestic sugar producers.
The government aims to fill the gap between annual demand and production by encouraging mill owners and cane growers because mill owners will have to pass on the 90 per cent of the VAT amount collected on the sales of sugar to the sugarcane farmers from this fiscal. Until last fiscal, sugar mills used to pass on 70 per cent of the VAT amount they collected to the farmers, which was about Rs 39 per quintal of sugarcane. Producers produce around eight to nine kilos of sugar from every quintal of sugarcane.
“The government has been promoting sugarcane farmers by raising the VAT rebate amount, which will ultimately make the country self-reliant in agriculture,” said Laxman Aryal, chief of the Revenue Division at the Ministry of Finance. He also heads the Revenue Advisory Committee that includes the private sector and independent tax experts.
The increased incentive to the sugar mills will also help them in selling their products at rates that are competitive with imported sugar. According to Manish Agrawal, promoter of Lumbini Sugar Mills and member of the Sugar Mills Association, as the government had increased the support price of sugarcane for the cane growers last year, it had raised the cost of production for the sugar mills.
Factory gate price of sugar in the crushing season (March to April) was fixed at Rs 58 per kg (including VAT), which has now been reduced by four rupees per kg to Rs 54 because mills have to sell their products at rates that are competitive with imported sugar.
“We appreciate the government’s decision of raising VAT rebate considering the high cost of production for Nepali sugar mills and decreased price of sugarcane in the international market,” Agrawal stated, adding, “The cost of producing sugar in the country is higher when compared with Indian producers.” India is one of the major exporters of sugar in the Nepali market.
The country imports about 50,000 tonnes of sugar annually and this incentive, as per the government, will help reduce the gap between domestic demand and local production.
Currently, 11 sugar mills are in operation in the country. They produced a total of 165,000 tonnes of sugar worth Rs 14.26 billion in fiscal 2014-15, according to the Ministry of Industry (MoI). However, the total annual demand of the country stands at 215,000 tonnes, which is met through imports mainly from India and Brazil.
Last fiscal, the MoI had fixed support price of sugarcane at Rs 461 per quintal, at a time when the price of sugarcane in the international market was in a downtrend. The sugar mills had then requested the government for other incentives to make their products more competitive than imported ones.
Sugarcane is one of the major cash crops of the country. It is cultivated on 67,000 hectares of land across the country and its annual production stands at 2.96 million tonnes per year, according to the Ministry of Agricultural Development.