Uttar Pradesh is the largest producer of sugar and ethanol in the country. In the ongoing sugar season of 2024-25, the State is expected to produce around 9.15 MMT of sugar, the highest in the country.
There has been an ongoing contention within the industry, whether denatured ethanol (Non-potable alcohol), which is unfit for human consumption, is mainly used for fuel blending purposes, is a State subject, or the Central Government, under which petroleum falls, has jurisdiction over it.
A senior sugar mill official, on the condition of anonymity, said that the ethanol export fee was first introduced in 1989 at a rate of 50 paise per litre. This was challenged then, and the Court quashed the fee.
It was again reintroduced in 2004. “In 2004, the Government increased this levy to Rs. 1 per litre. This increase was subsequently challenged by the sugar industry, which obtained multiple court stays against its implementation. As a result, the UP Government halted the collection of this fee and awaited a final verdict from the Supreme Court,” the source added.
Recently, the Supreme Court ruled in favour of the State Governments and upheld its power to levy such a fee.
“Following the Order, the UP excise has asked distilleries to deposit export fees on denatured alcohol exports out of UP since 2018. The total amount works out to be above Rs 300 crore,” the source added.
This has aggrieved the sugar industry in the State. They said that allowing the imposition of levies with retrospective effect sets a concerning precedent, undermining the Government’s broader objective of promoting ease of doing business in India.
