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News
Govt plans Rs.5,500-crore package for sugar sector
Date:
19 Sep 2018
Source:
The Financial Express
Reporter:
Banikinkar Pattanayak & Prabhudatta Mishra
News ID:
34553
Pdf:
Nlink:
Concerned about record cane arrears and the prospect of a domestic sugar glut worsening further, the government is considering offering financial assistance of around Rs 5,500 crore in the next marketing year, starting October, to assuage the pains of both farmers and mills, sources told FE.
As part of the proposal, expected to be taken up by the Cabinet Committee on Economic Affairs on Wednesday, the government could offer Rs 13.88 per quintal of cane directly to farmers for supplies of the raw material to mills, said the sources. A similar assistance of Rs 5.5 per quintal was provided earlier this year. Separately, an aid of Rs 1,000-3,000 per tonne of sugar could be offered this time around to mills for transporting the sweetener, depending on distance from ports.
While the Centre has been helping the sugar industry clear cane dues in recent years through packages, including loans and interest subsidy, the steps have failed to prevent arrears from piling up in regular intervals when sugar prices drop, thanks to generous and unreasonable hikes in cane prices by both the centre and states like Uttar Pradesh. On top of that, the food ministry this year reintroduced the sales quota system from June, impeding the mills’ ability to cut inventory and clear cane arrears fast.
Cane dues stood alarmingly high at Rs 14,845 crore as of mid-August, a record for this time of the year (Uttar Pradesh alone made up for over 70% of the arrears). According to an estimate by the Indian Sugar Mills Association (ISMA) in July, India’s sugar production could touch an all-time-high of 35–35.5 million tonne (mt) in 2018-19, against the current record of 32.25 mt achieved this year. The annual consumption is around 25 mt. This means the huge surplus stocks with mills (that have failed to ship out sugar without massive subsidy due to low prices overseas) will swell even further.
According to an ISMA estimate, mills were losing Rs 63 per quintal of cane due to exorbitantly high cane prices fixed by the centre. Of course, the losses have somewhat declined from this level due to a pick-up in sugar prices of late. However, the fact that the government has raised the fair and remunerative price (FRP) of cane to Rs 275 per quintal for 2018-19, against Rs 255 this year ( although a rule change caps effective hike for 2018-19 at 2.4% year-on-year) , will inflate their losses from the current level.
Recently, the government announced an up to 25% hike in prices of ethanol, meant for blending with petrol, for 2018-19 provided mills have produced it from cane juice, without extracting sugar out of it. The idea was to help cut surplus sugar production.
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