The Government is likely to announce a bailout package of over ₹7,000 crore to ensure cash-starved mills clear dues to farmers at the earliest, according to sources.
A decision in this regard is expected to be taken in the meeting of the Cabinet Committee on Economic Affairs (CCEA) scheduled Tuesday , the sources added.
Last month, the Government had announced a ₹1,500 crore productionlinked sugarcane subsidy for farmers to help millers pay cane payments.
Financial woes
Sugar mills are unable to make payments to cane growers as their financial health has worsened due to a sharp fall in sugar prices after a record production of 31.6 million tonne (mt) so far in the 2017-18 season (OctoberSeptember).
The mills owe farmers over ₹ 22,000 crore.
Maximum cane dues of more than ₹12,000 crore are in Uttar Pradesh alone, the country’s biggest sugarcane producing State.
Support to mills
According to sources, the government has worked out a slew of measures to ensure farmers’ dues are cleared by mills.
“A bailout package of ₹7,000 crore has been proposed,” they added.
The Food Ministry has proposed creation of a buffer stock of 3 million tonnes of sugar.
The carrying cost of the sweetener would be borne by the government which is estimated to cost the exchequer around ₹1,300 crore, they said.
Besides setting up of the buffer stock, the Food Ministry has proposed fixing minimum ex-mill sale price at around ₹30 a kg, reintroducing the monthly release mechanism and imposing stock limits on mills by fixing quota for each mill.
To help the beleaguered sugar industry, the Petroleum Ministry has proposed interest subsidy of 6 per cent on ₹4,500 crore to sugar mills for expansion and creation of new ethanol capacity.
The scheme provides five years time to mills for repayment of loans and a moratorium on repayment in the first year.
The interest subsidy itself would cost ₹1,200 crore to the government, the source added.
Ethanol pricing
The Ministry is also looking at raising ethanol price to help mills make pay farmers at the earliest.
Presently, the average exmill price of sugar is in the range of ₹25.60-26.22 , which is below the cost of production.
The Centre has already doubled sugar import duty to 100 per cent, scrapped export dutyto check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar to check sliding prices of domestic sugar.