Ram Vilas Paswan, the Union food minister, has written to the chief ministers of all major sugar producing states to take strict action against sugar mills which have not paid sugarcane farmers.

In his letter, Paswan says the central government had taken a host of measures over three years to improve the liquidity position of the domestic sugar industry.As a result, ex-mill prices have been fairly stable over a year. However, some mills are still having arrears from previous years, while those for the current sugar year (it began on October 1, 2017) have risen considerably, a matter of ‘serious concern’.Paswan noted the matter had already been raised on March 3 by the secretary of his ministry with state counterparts. “I, therefore, seek your intervention to issue strict directions to all sugar mills for immediate clearing of cane arrears for sugar season 2017-18 and those of earlier years.” He also urged action against defaulter mills wherever warranted.Cane payment arrears has crossed Rs 160 billion as on March 31, triggering concern over mills' ability to clear dues in a year when ex-mill sugar prices have dropped to around Rs 3,000 a quintal — this is, say millers, Rs 500-600 a qtl less than the cost of production.Since December, the central government has announced a series of measures to stop prices from dropping sharply under the weight of a bumper harvest. This has not been successful and and cane payment arrears have continued rising.From doubling the import duty to fixing the quota of the extent of sugar that mills can sell in the open market, the government has tried it all. Some weeks earlier, it fixed a compulsory export quota of two million tonnes which mills have to ship in the next few months, to part-absorb the surplus.

Entities in the sector say this will not make much of a difference, unless supplemented by incentives. For, global sugar prices have dropped sharply over rcent years. The government seems to feel that as and when the export happens, prices will automatically rise, negating the need for any more incentives.On Monday, news agency Reuters reported the Centre might consider bringing back a production-linked subsidy of Rs 55 a tonne, to be paid directly to cane farmers, to ease mills' financial burden. Reacting to the news and also in line with bullish market sentiment, sugar stocks surged by 9.5 per cent on Tuesday.Shares of Dwarikesh Sugar Industries rose 9.5 per cent, Bajaj Hindusthan by 6 per cent, Uttam Sugar Mills by 5.5 per cent, Triveni Engineering & Industries by 5.4 per cent and Ugar Sugar Works by 5.3 per cent on the BSE. Balrampur Chinis gained 5.2 per cent, Dalmia Bharat Sugar and Industries 5.1 per cent, Mawana Sugars 4.9 per cent, Dhampur Sugar Mills 2.7 per cent and Shree Renuka Sugars by 0.6 per cent.However, later in the evening, top government officials said the government might not considering any more incentives for the sector till at least the election in Karnataka gets over (next month); it is the country's third biggest producing state.The first two are Uttar Pradesh and Mahrashtra, which together produce a little over 80 per cent of national output.