These decisions were taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA).

"The duty on import of sugar under the OGL (Open General License) shall be increased to 40 per cent as against the current level of 25 per cent. This would prevent any imports in case international prices of sugar were to depress further," an official statement said.

The government also decided to remove "excise duty on ethanol supplied for blending", it added. Presently 12.36 percent central excise duty is levied.

"It has been decided that ethanol produced from molasses generated during the next sugar season and supplied for ethanol blending would be exempted from excise duty and the price benefit would be passed on the to the sugar mills/ distilleries," the statement said.

The government said that these steps would significantly improve the adverse price sentiments in respect of sugar and would improve the liquidity in the industry, facilitating the clearing up of cane dues arrears of the farmers.     

Earlier this month, Food Minister Ram Vilas Paswan had held two separate meetings of farmers and chief ministers to resolve the cane arrear crisis.

To bail out the cash-starved sugar industry, the Centre had in August last year hiked the import duty on both raw and refined sugar to 25 percent from 15 percent.

In February this year, it provided a subsidy of Rs 4,000 per tonne for the exports of 1.4 million tonnes of raw sugars.

Sugar prices are depressed due to surplus domestic production in the past four years, the government said, adding that mills have been constrained for liquidity and are facing difficulties in clearing cane dues owed to the farmers.

"This has affected the incomes of 50 million sugar cane farmers. Similar conditions of subdued prices prevail in the global markets," it said, adding that as on March 31, 2015, the cane dues arrears stood at Rs 20,099 crore.

On Tuesday, Paswan had said in Parliament that cane arrears stood at Rs 21,000 crore and all efforts were being made to address the problems.

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