Cane arrears: Govt mulls compensation options

Our Bureau New Delhi | Updated on April 23, 2018 Published on April 23, 2018

The Centre is considering various options to help sugarcane farmers whose arrears have ballooned.

The options include giving a production subsidy to sugarcane farmers, slapping a sugar cess on sales, reducing GST on ethanol being procured from sugar mills, and increasing the purchase price of ethanol for sugar mills.

The decision was taken at a high-level inter-ministerial meeting of Food and Consumer Affairs Minister Ram Vilas Paswan, Petroleum Minister Dharmendra Pradhan and Shipping and Road Transport Minister Nitin Gadkari here on Monday.

Officials from the Prime Minister’s Office as well as from the agriculture, commerce, and finance ministries also attended the meeting. Union Agriculture Minister Radha Mohan Singh was expected to be there, but did not attend.

The options will be placed before the Union Cabinet soon, Paswan said, adding that there could be more meetings if the issue needs more deliberation.

The issue of mounting sugarcane arrears is a politically sensitive one, which the Centre cannot afford to overlook, particularly with polls around the corner in Karnataka.

Sugar production in the country has already exceeded 30 million tonnes (mt), whereas the annual domestic demand is around 25 mt. According to an industry source, the final production figures could be 31.5-32 mt as several mills have not yet completed crushing.

The steep fall in ex-mill sugar prices, which are nearly ₹8,000 lower for every tonne of sugar produced, has severely affected the payment of arrears, which have mounted to ₹19,000 crore. Though the Centre has encouraged sugar mills to go in for exports by slashing the export tax, they have not picked up as prices in the global market are rather low at present.

The Minister said that reducing the GST on ethanol from the current 18 per cent to, say, 5 per cent will encourage more diversion of sugarcane into ethanol production. The possibility of increasing ethanol price paid by oil marketing companies from the current ₹40.85 per litre can also be considered.

The production subsidy could be similar to the ₹4.5 per quintal subsidy given to sugarcane farmers in 2015. There may be a need to increase it to at least ₹7-8 per quintal this time, an industry source said.

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Published on April 23, 2018
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