Cabinet to consider ~45 bn package for sugar industry

The Union Cabinet is likely to consider on Wednesday a ~45-billion plan to double the production assistance paid to sugarcane farmers and transport subsidy to mills, sources said.The proposal is part of the plan to clear arrears of ~135 billion, which sugar mills have towards farmers.

The Union Cabinet is likely to consider on Wednesday a ~45-billion plan to more than double the production assistance paid to sugarcane farmers and transport subsidy to mills exporting the sweetener, sources said. The proposal to raise production assistance to ~13.88 per quintal to farmers and transport subsidy to mills for exports of 5 million tonnes of surplus sweetener is part of the government plan to clear more than ~135 billion arrears sugar mills have towards farmers.

In June, the government had announced an ~85-billion package for the cash-starved industry, which is facing a glut-like situation because of record 32 million tonnes of sugar production in the 2017-18 marketing year, ending this month.

Sugar output is set to increase further to 35 million tonnes in the next marketing year as against the domestic demand of 26 million tonnes. The opening stock of sugar is estimated at 10 million tonnes on October 1.

According to sources, the Cabinet Committee on Economic Affairs (CCEA) will take up the food ministry's proposal on Wednesday under which production subsidy to farmers has been increased to ~13.88 per quintal for 2018-19 from ~5.5 in the current marketing year. Moreover, the ministry has proposed a mandatory export of 5 million tonnes of sugar and offered a subsidy of up to ~3,000 per quintal for transport and handling as global prices are unviable for shipments. This subsidy will be based on the distance of mills from ports.

Sources said the government will have to bear about ~45 billion on account of these measures to help sugar mills and cane farmers. These steps will enable mills to export sugar and clear cane arrears, which currently stand at ~135.67 billion. Mills in Uttar Pradesh owe the maximum at ~98.17 billion to cane farmers, they added.

The government has taken a slew of measures to bail out cash-starved sugar mills as well as cane farmers in the last one year.

The state doubled the import duty on sugar to 100 per cent and then scrapped the export duty on it. It also made it compulsory for millers to export two million tonnes of sugar even as the global prices were low.