The Hindu Business Line : Govt can shore up revenues through excise duty

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Mumbai Feb. 2 The Union Government can potentially garner huge revenue of Rs 1,000 crore a year by way of excise duty if only there is political will to impose and collect the tax. Between them, two major manufactured products - refined edible oil and sugar - can potentially generate direct tax revenue of up to Rs 1,000 crore.

Levy of Rs 1,000 per tonne excise duty on manufacture of refined edible oils will provide about Rs 700 crore revenue. The country refines about 70 lakh tonnes of raw oils including imported oils every year. Refined oils are usually consumed by well-to-do sections of the population who can easily afford to absorb the very nominal Re 1 per kg price increase.

Excise duty on refined oil was withdrawn when the new Government assumed office. It was an ill-advised move and was sought to be justified on the ground, among others, that collections were below expectation. Obviously, tax collection machinery was weak and enforcement lax.

The case for imposing excise duty on refined oils is strong, as it does not hurt poor consumers who generally consume raw or filtered oils, rather than refined oils. On import of refined oils, there will be a corresponding countervailing duty equivalent to excise duty. This, too, shall flow to the exchequer as additional revenue.

Of course, the industry will oppose any such move and bring pressure on the Government, as it always happens. It is up to the policymakers to withstand the pressure. The Government must also ensure that there are no islands of "exemption" like say refining units in Kutch area that enjoyed an unfair advantage three years ago.

Sugar

On sugar, the current rate of excise duty is Rs 850 a tonne. There is case for raising it marginally by Rs 150 a tonne to Rs 1,000 a tonne. On the output of about 200 lakh tonnes sugar, the Centre can raise an additional Rs 300 crore as excise duty.

The marginal hike will translate to 15 paise a kg of sugar, something that consumers can easily absorb.

However, the critical part of the recommendation is that the revenue generated must be earmarked and expended exclusively for the development of the oilseeds sector and sugar sector.

For instance, the budgetary outlay for Oilseeds Production Programme is too inadequate to make any impact on production. Larger financial allocation must accompany stricter implementation of the programme. A sense of accountability must be built into the system.

Low yields that are a bane of the country's oilseeds production should be attacked with improved input supplies, water management and technology infusion. All these cost money.

The additional revenue from sugar can be ploughed into research for sustainable cultivation of cane. Reducing water intensity, reducing crop duration, improving juice and sucrose content and so on are priority areas.

More Stories on : Commodities | Excise and Customs | Oilseeds & Edible Oil | Sugar

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