Concerned over rising farmers discontent over lower payments and the build up of cane arrears, the government has approved a Rs 8,500 crore package that aims to increase farmers income by creating a buffer stock for sugar and enhancing ethanol production capacity allowing additional outlet for sugarcane produce in a bumper season.
The new package, which was cleared by the Union Cabinet on Wednesday, has also fixed a minimum selling price for sugar to cut mill losses and support them clear cane dues at the earliest. Though the changes are expected to benefit the farmers and sugar mills alike and make the sector healthy, it is also being seen as ruling party’s remedy for the Kairana bypoll loss in Uttar Pradesh, the largest sugar producing state.
As per the Cabinet decision, a sum of Rs 4,440 crore will be provided as soft loan to the sector for building ethanol production capacity to absorb the cane and a buffer stock of 3 million tonnes. In addition, for the first time Rs 29 per kg has been fixed as the minimum price below which mills cannot sell the sweetener. These decisions are aimed at helping mills in clearing part of over Rs 22,000-crore arrears to cane farmers.
Sugar mills have not been able to clear cane arrears due to losses they are suffering on sale of sugar where prices have plummeted below production cost on account of record output of 31.5 million tonnes in the 2017-18 season ending September against the annual domestic demand of 25 million tonnes.
Announcing the decision, Food minister Ram Vilas Paswan said the government has decided to create a buffer stock of 3 million tonnes for one year, which will result in a Rs 1,175 crore burden to the Centre in form of storage cost to mills. The carrying cost will be paid on a quarterly basis, which would be directly credited into the farmers’ account on behalf of mills against their cane dues. The creation of buffer stock would help soak up excess supplies and boost sliding domestic prices.
Sugar is currently being sold at Rs 26-28 per kg against the average production cost of Rs 32 per kg. Exports are also not a viable option as prices there too are lower than the domestic prices.
With regard to soft loans to mills for ethanol, Paswan said the government will bear interest subvention of Rs 1,332 crore over a period of five years including moratorium period of one year. The government had last month announced production-linked subsidy of Rs 1,540 crore for sugarcane farmers, taking the total package to about Rs 8,500 crore. The minister said the minimum selling price of white/refined sugar has been fixed at Rs 29 per kg. The government has notified Sugar Price (Control) Order, 2018 under Essential Commodities Act, 1955 to fix minimum selling price.
Earlier this year, the Centre had doubled sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.