Maharashtras ailing cooperative sugar industry has received yet another shock after income tax department started issuing demands for the payment of dues pending since 1992. These arrears are of the order of Rs 2,500 crore.

The mills under the Federation of Cooperative Sugar Factories in Maharashtra, would soon seek the intervention of Finance Minister Pranab Mukherjee with a plea that the sugarcane price paid to farmers fixed by the state government be treated as business expenditure and not profit.

Vijaysinh Mohite-Patil, chairman of the Federation of Cooperative Sugar Factories in Maharashtra, a representative body of over 160 cooperative mills, told Business Standard, At present, the cases fall in two different categories those falling before 2009 where the concept of statutory minimum price was in force and cases after 2009 when fair & remunerative price (FRP) regime was introduced.

Patil said the income tax departments timing to recover arrears comes at a time when the industry is currently reeling under a crisis due to dwindling sugar prices having short margin on stock of Rs 1,500 crore. Moreover, the next season, which is going to start in October requires pre-seasonal working capital loan of Rs 1,100 crore.

Chairman of a sugar mill from the sugarcane-rich western Maharashtra, who did not want to be identified, said, The industry is not having funds to make the payment of taxes. The money has already been passed down to cane growers. If income tax department takes coercive action for the tax demands like attachment of property, bank accounts and sugar stock, the factories will be compelled to recover money from the farmers. This may lead to unrest in the farmers.

The federation has demanded that all cases before 2009 may be accepted as sugarcane prices have already been paid and the coffers to the sugar factories cannot meet the huge tax demands raised for the past 18 to 19 years.

As far as cases falling after 2009, the actual price paid may be allowed as business expenditure in the year in which the sugarcane is received and accepted.

A federation official said some sugar mills had already filed appeal before the Appellate Tribunal against the recent order passed by the Commissioner of Income Tax (Appeals) and also filed stay petitions.