National Federation of Cooperative Sugar Factories Ltd (NFCSF) has sought the classification of ethanol as a declared good under Section 14 of the Central Sales Tax, 1956.

Addressing the 48th annual general meeting of the NFCSF here on Wednesday, the Federations President, Mr Jayantilal B. Patel, said that granting declared good status to ethanol was necessary in order to restrict the powers of State Governments to impose levies on the product.

Currently, apart from varying rates of sales tax, the States charge a host of other levies, including import and export fees on ethanol entering or leaving their territory. In the event of being made a declared good, the States will not be allowed to tax ethanol at more than three per cent.

This, in turn, is expected to provide a fillip to the gasohol programme, which proposes to increase the proportion of ethanol blending in petrol from the existing five per cent to 10 per cent from October 2008.

The Union Food and Agriculture Minister, Mr Sharad Pawar, has, in fact, called a meeting of State Finance and Agriculture Ministers on October 3 to evolve a consensus on making ethanol a declared good and a good of special importance in inter-State trade and commerce.

Mr Patel also demanded an end to the obligation of sugar factories to supply 10 per cent of their production as levy for the public distribution system.

The reason for this, he said, was that whenever prices of free sale sugar dipped below that of levy sugar (as was the case now), the State Governments did not lift their quota.

As a result, the levy sugar kept accumulating in the godowns, with the carrying cost being borne by the factories.

The solution, then, would be to free factories from the levy obligation altogether. The Government could, instead, purchase sugar from the mills at a negotiated price to meet the requirements of the below poverty line population.

Mr Patel further called for the build up of a strategic sugar reserve by the Centre as has been done in China.