Our Bureau The Union Cabinet on Wednesday cleared a ₹5,500-crore package for the sugar industry, which is reeling under an unprecedented glut in production. The move is also significant for the NDA government that wants to ensure mounting sugarcane dues to farmers do not develop into a political landmine ahead of the 2019 general elections.

Under the package, sugar mills will get a transport subsidy on exports of up to 5 million tonnes (mt) and financial aid of ₹13.88 per quintal of cane crushed during the 2018-19 sugar crushing season that begins next month, Finance Minister Arun Jaitley said at a media briefing on the Cabinet decisions. This is the second package for the sugar industry after the ₹8,500 crore announced in June.

The industry is facing a glut-like situation because of record production of 32 mt in the 2017-18 sugar season. With the acreage under sugarcane now higher, there is a possibility of even higher sugar production in the coming season.

While sugar mills located within 100 km from ports will get ₹1,000 per tonne as transport, freight and handling charges, those situated more than 100 km away, but within coastal States, will get ₹2,500.

Mills in landlocked States will get ₹3,000 per tonne or the actual expenses they incur, whichever is lower. The Centre will set aside ₹1,375 crore for this, an official statement said.

Besides, to help the mills clear their dues to sugarcane farmers, the Centre is offering a production assistance of ₹13.88 per quintal of cane crushed. This is nearly 2.5 times the ₹5.5 given in the previous season. This will lead to an outgo of ₹4,163 crore for the government. The amount will be paid directly to the farmers but adjusted against the dues from the mills to them.

According to Indian Sugar Mills Association (ISMA) Director General Abinash Verma, the ₹13.88 per quintal assistance will help reduce the industry’s cane price liability by around 5 per cent of next year’s fair and remunerative price (FRP) of ₹275 per quintal.

“This is the largest financial assistance towards FRP ever given by the government and will substantially reduce the expenditure and working capital requirement of sugar mills next year,” he said in a statement.

Ram Vilas Paswan, Minister of Food and Consumers Affairs, said the measures initiated in the recent months have helped bring down the arrears to farmers from ₹23,000 crore in May to ₹12,900 crore now. However, the mills could export just 6 lakh tonnes against the quota of 20 lakh tonnes.

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