To reduce burden on the exchequer due to over-production of sugar, Niti Aayog has constituted a task force to suggest long-term solutions such as crop diversification to reduce adverse impact on ground water and aligning sugar industry with global markets.
The 13-member panel, which will be headed by Niti Aayog member Ramesh Chand, includes secretaries of food, agriculture, expenditure, commerce, petroleum and environment. The panel will suggest long-term solutions to the problems faced by the sugarcane farmers and measures for rationalising the sugar economy.
“The Centre can’t continue to give packages year-after-year to the sugarcane industry, which has to cut back production,” an official said.
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 at 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 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 Indian Sugar Mills Association 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 FRP (fair and remunerative price) of cane to Rs 275 per quintal for 2018-19, against Rs 255 this year (although a rule change caps the 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.
In June this year, the government approved a package comprising Rs 4,440-crore loans to mills to expand ethanol production capacity and Rs 2,507-crore aid in the form of interest subsidy on the loan and carrying cost of creating a buffer stock. Before that, an output-linked assistance of Rs 5.50 per quintal to farmers for cane supplies (with potential cost of Rs 1,540 crore to the exchequer) was approved.