The Union Cabinet has approved a Rs 7,000 crore package for the beleaguered sugar industry to help pay dues of Rs 22,000 crore to farmers and approved new norms to speed up the closure of sick public sector companies, making sure that affordable housing would get top priority in using their land. The government has fixed the minimum price of sugar sold by mills at Rs 29/kg, which the Indian Sugar Mills Association (ISMA) has welcomed as the current price is Rs 28. However, the cane price advised by the government requires an ex-mill price of Rs 35, the body said. The association said the minimum price order may not significantly impact retail prices.
“It will, therefore, be a challenge to expect the sugar industry to clear the huge cane price arrears on this basis,” ISMA director general Abinash Verma said. On the same note, Dilip Walse Patil, president of the National Federation of Cooperative Sugar Factories, said the size of the package was “meagre” compared with the Rs 22,000 crore outstanding cane dues of farmers.
The sugar industry has suffered as this year’s output is estimated to rise well above the domestic demand of 25 million tonnes to a record 31.9 million tonnes, while global prices have crashed. This has squeezed mills to the point that they have been unable to pay farmers for cane they supplied.
The plight of cane farmers is a sensitive issue and has a bearing on voter mood in Uttar Pradesh, the largest sugarcane producer, where the BJP recently lost a crucial byelection in Kairana, which is located in the state’s sugarcane belt. Sugarcane prices and arrears are also a big issue in Maharashtra, the other major cane producer of the country.
Millers complain that increasing the official price for cane cripples the industry, making them unable to pay farmers. What is of concern is that “there is no idea or proposal on rationalisation of cane pricing policy, which is actually the main reason for all the problems of the industry today,” ISMA’s Verma said.
The Cabinet also approved interest subvention of Rs 1,332 crore for five years on loans of Rs 4,400 crore, which is also a part of the Rs 7,000 crore package, to expand ethanol capacity. This would absorb surplus sugarcane, which Verma said was an “excellent move.” The government will put in place a mechanism to control retail prices of sugar by imposing stock holding limits on sugar mills, drawing protests from the industry. It will build a buffer stock of 3 million tonnes.