A major farmers’ body has suggested that the government buy surplus sugar stock from mills and the proceeds be used to clear cane arrears that have hit a record Rs 21,000 crore.

Consortium of Indian Farmers Association chief adviser P Chengal Reddy said that while the steps declared by the government on Wednesday — including the hike in import duty on sugar to 40% from 25% and removal of excise duty on ethanol from the next marketing year starting October — would benefit farmers and the industry in the long run, the government must take steps to address the problem of cane arrears immediately.

“There is a surplus sugar stock of 3.5 million tonne in the current season, which should be disposed of quickly. The best way to do this is that the government must buy the surplus sugar at cost price. This would generate Rs 10,000 crore worth of cash flows for the industry, which it could use to clear some of the cane dues owed to farmers before the current season ends,” Reddy said.

The sugar industry has also been asking the government to create a strategic reserve by buying 10% of sugar production (roughly 2.6-2.7 million tonne) at Rs 31 per kg, which is the average cost of production based on the fair and remunerative price of cane.