NEW DELHI – The food ministry has requested the Prime Minister's Office to extend the buffer stock subsidy scheme for sugar by a year to 2020-21 (Aug-Jul), a senior government official said today.
Last year, the Union Cabinet had approved the creation of a 4-mln-tn sugar buffer stock for 2019-20, which cost the government 16.74 bln rupees.
"We have requested the PMO to approve same-to-same buffer subsidy scheme for sugar mills for next year also for farmers' betterment. It will help ease liquidity and help mills to pay out cane dues to farmers," the official said.
As of Friday, sugar mills across the country owed cane dues of 176.83 bln rupees to farmers.
Usually, the Centre makes mill-wise allocation of buffer stock and every factory has to set apart the quantity allotted.
"The extension of buffer stock will reduce a substantial part of the burden of sugar mills. Not only will it give extra cash flow to sugar mills, but also improve market sentiment," an industry official said.
At a time when output is expected to bounce back to 31-32 mln tn next season while annual domestic consumption is only 25 mln tn, the extra sugar produced will only add to the swelling stocks.
The government expects opening stocks for 2020-21 (Oct-Sep) to stand at 11.5 mln tn.
Apart from requesting extension of the buffer stock subsidy for a year, the government is also considering a hike in the minimum selling price of sugar by 2 rupees per kg to 33 rupees to help mills fulfil their cane payment obligations.
The Centre is also working on a soft loan package for sugar mills.
Sugar mills have been struggling since the lockdown was imposed. Following a severe hit to sales during the peak summer season, ex-mill prices fell nearly 3 rupees per kg to 31 rupees a kg in April. However, prices have improved over the past two-three weeks by over a rupee to 32.5 rupees as some restrictions have been relaxed, and offices and markets are reopening.
"One of the reasons for building of arrears in the current season is the decrease in demand due to COVID-19 and nationwide lockdown, which has reduced the consumption of sugar by around 1 mln tn leading to lowering of revenue realisation of sugar mills," the food ministry had said in a release.