Centre allocates buffer stock quota for sugar mills

Acting further on its decision to create a buffer stock of 3 million tonnes (mt) of sugar to help the industry tide over a glut in production, the government has provisionally allocated quota of sugar that could be maintained by different sugar mills as buffer stock.

In an order issued on Monday, the Directorate of Sugar and Vegetable Oils under the Department of Food and Public Distribution, announced the quantity of sugar that can be kept as buffer stock individually by over 500 sugar mills.

Time to decide

The authorities have given the mills time till Wednesday to decide whether they want to participate in the scheme as well as to decide whether they would settle for a lesser quantum than that has been tentatively allocated.

According to the order, one of the major conditions that sugar mills need to meet to participate in the scheme was to furnish the details of sugar stocks held by them as on May 31. The information needs to be filed by Wednesday, “failing which it would be presumed that the mill is not interested in maintaining the buffer stock,” it said.

As per a notification issued on June 15, the Government plans to hold a buffer stock of 3 million tonnes of sugar for a year from July and the carrying cost for the same would be borne by the Government. According to Food and public distribution minister Ram Vilas Paswan maintaining the buffer stock would cost the exchequer ₹1,175 crore.

Dealing with glut

The creation of sugar buffer stocks was among a few measures announced by the Government to bail out beleaguered sugar industry which is suffering from an overproduction in the current 2017-18 sugar season (October-September). The sugar production this season is projected to be nearly 32 million tonnes, which is around 50 per cent more than that in the previous season. The glut in production has led to a crash in prices leading to a liquidity crisis for sugar mills which in turn resulted in the accumulation of cane dues to ₹22,000 crore.

The purpose of the buffer stock assistance is to enable sugar mills use the funds reimbursed as carrying cost of sugar to first pay farmers the sugarcane dues for the season. The support spans the carrying cost in terms of interest, insurance and storage charges for maintenance of buffer stock.