Agri Business

Cabinet clears bailout package for sugar industry

T. V. Jayan New Delhi | Updated on June 06, 2018

Minimum selling price of white/refined sugar to be fixed at Rs 29 per kg

The Cabinet Committee on Economic Affairs (CCEA) on
Wednesday approved a slew of measures that would help improve the liquidity of cash-starved sugar industry, including setting aside a sum of Rs 4,440 crore to boost ethanol production capacity and creating a buffer stock of 3 million tonnes of sugar.

CCEA has also decided to fix the minimum selling price of
white/refined sugar at Rs 29 per kg and impose stock holding limits on sugar mills, Food minister Ram Vilas Paswan told reporters here.

Production assistance

The measures would involve a sum of Rs 7,000 crore and was in addition to a sum of Rs 1,540 crore set aside to give a production assistance of Rs 5.5 per quintal of sugarcane crushed announced last month.

"If the sugar mills still not pay the dues to the farmers, the States have all the rights to take punitive action against them," Paswan said.

The Government has decided to extend these sops to the mills as there was a glut in sugar production in the current sugar season (October 2017 to September 2018).

Liquidity crisis

The overproduction has led to crash in prices, leading to a liquidity crisis for sugar mills which in turn resulted
in the accumulation of cane dues to Rs 22,000 crore. The mounting cane arrears was said to be one of the reasons why the BJP lost a recent Lok Sabha bypoll in Kairana, a sugar belt in Uttar Pradesh.

3 million tonne stockpile

According to Paswan, maintaining a stockpile of 3 million tonnes of sugar for a year would cost Rs 11,75 crore to the exchequer. However, the government would reimburse this sum on a quarterly basis directly to farmers, not to the mills, to be adjusted against their cane price dues.

The department of food, however, would reserve its right to review this scheme on the basis of market price and availability of the sweetener, he said.

MSP of white sugar

The Government would soon bring a notification to fix the minimum selling price of white/refined sugar at Rs 29 at the mill gate.

“This will not affect the availability of sugar to consumers at a reasonable price and the Government will put in place a mechanism to ensure that the retail prices of sugar are kept fully under control,” an official statement said.

Ethanol blending

To ensure more sugarcane is diverted for producing ethanol which could be blended with petrol, the Government made provision to give soft loans worth Rs 4,440 crore to sugar mills for augmenting their ethanol production capacity.

The government would bear an interest subvention of up to Rs 1 332 crore over a period of five years with one year
moratorium on these loans that would be sanctioned by banks over a period of three years.

This would help diversion of sugar to ethanol production during surplus years to reduce excess inventories, the
statement said.

Measures to improve liquidity position

The Government had in the last few months announced several other measures to improve the liquidity position of sugar mills. These included doubling the Customs duty on imported sugar to 100 per cent from the earlier 50 per
cent, besides announcing export quota for sugar mills to export a total of 2 mt during the current marketing season.

It also withdrew the Customs duty on sugar exports and re-introduced Duty Free Import Authorisation Scheme which would help facilitate and incentivise export of surplus sugar by sugar mills.

Published on June 06, 2018

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