Levy of Export Duty on Molasses Exports

Notification No. 01/2024 - Dated: 15-1-2024 - Seeks to amend Second Schedule to the Customs Tariff Act to prescribe export duty of 50% on exports of Molasses (HS 1703).

The Indian Government's recent decision to impose a 50% export duty on molasses is primarily aimed at boosting the domestic availability of molasses for ethanol production. This move is part of the government's larger initiative to increase the ethanol content in petrol, with a target of achieving 20% ethanol-blended petrol by 2025-26, up from the current level of 12%​​​​​​.

Under Section 8 of the Customs Tariff Act, the Central Government is empowered to increase or levy export duties in urgent situations. Specifically, it states that if the government deems it necessary to take immediate action regarding export duties, it can amend the Second Schedule of the Act accordingly​​. Utilizing this provision, the government has amended the Second Schedule to include a 50% export duty on molasses, effective from January 18, 2024​​.

Rationale Behind the Levy

1. Boosting Ethanol Production: The government aims to elevate ethanol content in petrol, necessitating increased availability of molasses, a key ethanol production ingredient​​​​.
2. Addressing Sugar Shortage: The policy also responds to a sugar shortage for local consumption, which has led to high sugar prices. This shortage is partly attributed to erratic monsoon rains affecting sugarcane yield​​.
3. Reducing Import Bills: By increasing the ethanol blend in petrol, the government intends to decrease the country's import fuel bill, thereby saving on foreign exchange and reducing dependence on imported fuel​​.
4. Support from Sugar Industry: The sugar industry, a major producer of molasses, supports this tariff as it ensures molasses' local availability for meeting ethanol blend objectives​​.
5. Global Impact Consideration: India is a significant player in the global molasses market, contributing about 25% to international trade. The export duty is expected to have a substantial impact on global supply and pricing dynamics​​.

Implications of the Levy

• Domestic Market Impact: The duty is expected to increase the domestic availability of molasses, which could stabilize or lower its price in the Indian market.
• Effect on Sugar Industry: The sugar industry may see a shift in its operational dynamics, focusing more on ethanol production from molasses.
• Global Trade Alterations: India's significant share in the global molasses market means this duty could alter global supply chains and pricing.

Conclusion

The Indian Government's decision to levy a 50% export duty on molasses underlines its commitment to increasing ethanol blending in petrol, aiming for economic and environmental benefits. This decision reflects a strategic move to balance domestic needs with global trade considerations, showcasing India's evolving approach towards sustainable energy and self-reliance in fuel production.

Full Text:

Notification No. 01/2024 - Dated: 15-1-2024 - Seeks to amend Second Schedule to the Customs Tariff Act to prescribe export duty of 50% on exports of Molasses (HS 1703).

Dated: 16-1-2024