Nearly 40 per cent of the sugar mills in the country may not be able to take advantage of the recently-announced financial assistance package by the Centre.

This is because many in the sector, which is reeling under a supply glut, may not fulfil an important eligibility condition.

Sop with a rider

Acting upon a recommendation made by a Group of Ministers, which consisted of Food and Consumer Affairs Minister Ram Vilas Paswan and Road Transport and Highways Minister Nitin Gadkari, the Cabinet on May 2 decided to give farmers an assistance of ₹55 per tonne of sugarcane crushed during the current sugar season to bring down mills’ dues to farmers.

Even though the assistance is to be given to farmers directly and adjusted from the arrears to be paid by sugar mills, the government said that such sop would be available to only those qmills that have complied with all directives of the Department of Food and Public Distribution (DFPD) during the season.

Stockholding limits

One of them was a directive in February on sugar stocks held by mills.

The notification meant to arrest falling sugar prices, asked mills to hold on to 83 per cent of stock they had by January 31 through February; and at end of March 86 per cent of the stock they held as on February 28. In a letter to the DFPD Secretary on May 11, the Indian Sugar Mills Association (ISMA) has said many sugar mills were not in a position to comply with this condition.

Selling pressure

ISMA said in the letter, a copy of which was accessed by BusinessLine , in absence of incentive, if any sugar factory has not been able to comply with the government notifications and does not now have any opportunity of fulfilling the same, “it is not only a fait accompli but an unfair retrospective application of a condition for Government assistance.”

According to an industry source, many sugar mills were compelled to sell the stock beyond permitted limits because some didn’t have enough storage capacity as the production was nearly 50 per cent more than that in the previous season, others because the “State governments were compelling them” to clear the cane dues of farmers, the source said.

Moreover, it was “unfair” on the part of the government to slap a retrospective condition if the intention was to help farmers and sugar mills to come out of the current crisis, the source said.

The government decided to announce the financial assistance as sugarcane arrears to farmers mounted to more than ₹20,000 crore as the overproduction of sweetener led to slump in prices. In most markets, sugar was selling nearly 30 per cent lower than cost of production.

However, a DFPD official indicated that currently there was no move to withdraw or modify the conditions.