NEW DELHI: The government is considering some of the demands from the sugar industry and farmers organizations, including creating a buffer stock for 10% of the estimated production this year, increasing import duty on the sweetener to 40% and providing financial assistance or help to millers to increase ethanol production. TOI has learnt that the issues were discussed during a series meetings that were attended by finance minister Arun Jaitley, food minister Ram Vilas Paswan and road transport minister Nitin Gadkari, and others. A source said the final decision has to be taken by the finance ministry since these will have financial implications. But there is near unanimity that government has to help the industry so that it can clear the cane arrears of farmers. The arrears for the current crushing season are estimated at close to Rs 20,000 crore, with nearly 50% of the dues accounted for by Uttar Pardesh, a state that goes to poll in less than two years. Sources said the total sugar production during this crushing season could be close to 270 lakh tonnes and government may have to spend at least Rs 1,000 crore to maintain 10% of the total production (27 lakh tonnes) as buffer stock. Those arguing for a buffer cite stability in market prices as the main reason. "It was also observed that the crisis is getting bigger as we are producing more and more sugar. So, we are piling up the stock and there is a crash in market price. One of the viable options is to diversify this industry, from producing more sugar to produce more ethanol. But that will happen only when the producers get the right price, little profit over the production cost. We may have to provide some sort of help for this model to be viable," a top government source said. At present, government has made it mandatory for oil marketing companies for 5% ethanol blending in petrol. But the sugar industry is unable to meet the requirement. For example, the total requirement for of ethanol for 5% blending during last year was 115 crore litres. But the millers could provide only 72 crore litres. Earlier, apex body of sugar millers, Indian Sugar Mills Association (ISMA) had written to petroleum ministry to consider providing assistance of Rs 7-8 on every litre of ethanol that millers require to divert 'B' grade heavy molasses away from producing sugar to ethanol. It has also suggested that other alternative would be to exempt central excise duty on fuel grade ethanol, which is currently 12.5%.
Meanwhile, sources said that the farmers' organizations have demanded more interest free loan the government so that they can release some portion of cane growers' arrears. During the last one year, the millers have availed interest free loan and export incentive for raw sugar, which is close to Rs 6,400 crore.