For the fourth time in the last five months, the Centre has approved incentives to help the cash-starved sugar mills clear thousands of crore in arrears of payment to cane farmers.
On Wednesday, the Cabinet Committee on Economic Affairs cleared a ₹5,538-crore package which includes higher production assistance to farmers, as well as transport subsidies for mills trying to export sugar.
“We hope to bring the arrears down to zero with this package,” Food Minister Ram Vilas Paswan told reporters after the decision.
Record harvests over the last two years have led to sugar production levels far above domestic consumption, resulting in a crash in prices and a liquidity crisis in the industry.
“Due to excess carry-over stocks and indication of similar excess production in the ensuing sugar season 2018-19, the liquidity problem of the sugar mills is likely to persist in the coming sugar season too. As a result, cane price arrears of sugarcane farmers may also peak at unprecedented high level,” said an official statement on the Cabinet decision.
Currently, the mills owe farmers more than ₹13,000 crore in arrears, down from a peak of more than ₹22,000 crore in May 2018.
That was the month when the Cabinet approved a production subsidy of ₹5.5 per quintal of cane crushed in the 2017-18 season, estimating that this would cost ₹1,500 crore. That was also the month that the ruling BJP lost a crucial by-poll in Kairana, in the heart of Uttar Pradesh’s sugarcane belt.
Wednesday’s package included a production subsidy that is 2.5 times higher, at ₹13.88 per quintal for each quintal of cane crushed in the 2018-19 season, at an estimated cost of ₹4,163 crore, according to the statement. The transport subsidies for exports amount to ₹1,375 crore.
However, Food Secretary Ravikant admitted that so far, none of the previous subsidy announced in May has been claimed by mills or paid to farmers, as several government conditions — including export quotas — had not been met. “Nothing has been spent of the ₹1,500 crore yet,” he said. “We expect to start getting applications and claims from mills now.”