Cabinet clears ₹7,000-cr bailout package for sugar industry

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday cleared a ₹7,000 crore bailout package for the cash-starved sugar industry, which includes the creation of a 3-million-tonne sugar stockpile and subsidised loans for the enhancement of the country’s ethanol production capacity .

The package came a week after the BJP lost a by-election in a key Parliamentary constituency in the sugarcane belt of Uttar Pradesh.

The Committee also decided to fix the minimum selling price of white/refined sugar at ₹29 per kg and provide an interest subvention of ₹1,332 crore on loans availed by sugar mills to enhance ethanol production, Union Food Minister Ram Vilas Paswan told reporters here. The soft loans, for which ₹4,440 crore has been set aside, would be for five years, with a moratorium of one year. The buffer stock of 3 mt sugar for a year would cost ₹1,175 crore to the exchequer. The government will reimburse this sum on a quarterly basis directly to farmers not to the mills to be adjusted against their cane dues, he said.

The package was over and above sops announced by the government last month in which it decided to give production assistance of ₹5.5 per quintal of sugarcane crushed to mills to clear dues to farmers. The money, to be paid directly to farmers, was to be adjusted against existing dues.

Glut in production

The Indian sugar industry has been reeling under a glut in production in the current season (October 2017-September 2018), which has hit cash flow. This, in turn, has resulted in the ballooning of arrears to be paid to farmers to a whopping ₹22,000 crore.

The industry welcomed the raft of measures announced by the government but said it was not enough. The minimum selling price of ₹29 “is not enough to cover the cost of sugarcane at a fair and remunerative price of ₹290 per quintal,” said Abinash Verma, Director General of the Indian Sugar Mills Association.

To give a boost to the domestic industry, the government has announced a slew of measures in recent months.

These included doubling the customs duty on imported sugar to 100 per cent and allowing mills to export 2 mt.