Tribune News Service
New Delhi, June 6
The BJP-led Centre on Wednesday announced an additional Rs 7,000-crore package to boost income of sugarcane farmers by creating a buffer stock of sugar, fixing its minimum selling price at Rs 29 a kg and enhancing ethanol production capacity to cut losses of sugar mills.
Aimed at helping mills clear some part of the over Rs 22,000-crore arrears they owe to farmers, the decisions follow the BJP’s recent defeat in Kairana, Uttar Pradesh—India’s largest sugar producer and a state that sends 80 MPs to the Lok Sabha
Industry and agriculture experts have welcomed the measures, but termed these “inadequate” and “meagre”, almost akin to “light rain on dry land”. According to the National Federation of Cooperative Sugar Factories (NFCSF), Rs 7,000 crore (Rs 8,500 crore, if the earlier production-linked Rs 1,540 crore subsidy is added) “meagre” against mounting arrears of above Rs 22,000 crore.
The Indian Sugar Mills Association (ISMA) said the proposed minimum price of Rs 29 per kg was not enough to cover the cost of sugarcane at the fair and remunerative price (FRP) of Rs 290 per quintal at the current all-India average recovery of 10.8 per cent. “The ex-mill sugar price that supports the current FRP works out to be around Rs 35 per kg and, therefore, Rs 29 per kg is inadequate. It will, therefore, be a challenge to expect the sugar industry clear the huge cane price arrears on this basis,” said Abinash Verma, ISMA director general.
“Imposing stock-holding limits on sugar mills is tantamount to controls on sugar sales, which is not the right way to move into the future. Creation of buffer stocks of 30 lakh tonnes will reduce some surplus sugar from the market, though only for a year, and will improve market sentiment to support domestic prices. What is concerning is that there is no idea or proposal on rationalisation of cane-pricing policy, which is actually the main reason for all problems of the industry,” Verma added.
Agriculture expert Sudhir Panwar termed the help as “momentary relief” that would “help mills more than farmers”. The sustainable solution to the sugar sector lies in structural reforms, he said. Struggling with rising fuel and commodity prices, for consumers the measures could come at an increase in price of the sweetener.
Food Minister Ram Vilas Paswan said the buffer stock of 30 lakh tonnes for one year would come at a cost of Rs 1,175 crore in form of storage cost to mills. The carrying cost will be paid on a quarterly basis and credited directly into farmers’ account on behalf of mills against their cane dues. “Mills are selling sugar at Rs 26-28 per kg as against the average production cost of Rs 32 per kg. Exports are also not viable as global prices are lower than rates prevailing in India,” he said.
Meanwhile on soft loans to mills for ethanol, the minister said the government would bear interest subvention of Rs 1,332 crore over a period of five years, including moratorium period of one year. The industry has termed as “excellent” the move of providing subsidised loans for ethanol production capacity. “It will encourage setting up of more distilleries in the country over the next 3 years and will help in diverting some of the surplus sugarcane into ethanol and reduce surplus sugar in the long run,” ISMA said.