New Delhi, Oct. 3: The government today allowed state governments to raise money through issue of bonds which will help pay sugar farmers support prices.
Minister of parliamentary affairs Sushma Swaraj said the cabinet has also cleared an export subsidy of Rs 500 a tonne towards port charges and formation of a National Tax Tribunal (NAT).
The export subsidy, which will cost the government Rs 150 crore, has been provided to dispose a huge sugar surplus of around 15 million tonnes. Swaraj said state governments would be given support from the Sugar Development Fund (SDF) to meet the interest liability, which will arise due to the difference between the coupon rate and 4 per cent the rate at which loans are provided to the sugar mills.
...The state governments would in turn extend 10-year loans to the sugar mills at a maximum rate of 4 per cent per annum, the government said in a statement. This loan would have a moratorium on repayment of principal and interest for a period of five years and would, therefore, be repaid in 5 equal installments.
Market observers said the package would cost the government around Rs 500 crore.
The government has had to work out the new package after the Uttar Pradesh government rejected an earlier loan deal of Rs 678 crore on the ground that the terms were loaded against state governments especially the provision that stopped states from announcing support prices higher than those laid down by the centre.
Unlike the last package which was restricted to northern region, the new blueprint will be extended to all states if it is approved. Officials said the fresh sops have a political tinge: It is being drawn up to placate the Shiv Sena, which had slammed the previous draft of the plan saying it betrayed a strong a north Indian bias.
The package is being seen not so much as pro-farmers, but as one that will benefit sugar mills in the long run. The reason is that cane planting is likely to suffer as farmers waiting for payments to be cleared, shift to alternative crops. The scrapping of duty and export subsidies are meant to help sugar mills directly.
Tax tribunal okayed
The cabinet also cleared the formation of National Tax Tribunal, which is expected to reduce the burden of pending cases in high courts and also ensure uniformity in administration of tax laws.
The tribunal would have an all-India jurisdiction and its judgement can only be contested in the Supreme Court, Swaraj said.
Twenty-five benches would be set up under the tribunal at a cost of Rs 7.88 crore, she added.
An appeal issuing from an order passed by the Income Tax Appellate Tribunal and the Central Excise and Sales Tax Appellate Tribunal would come to the tax tribunal only on a substantial legal issue.