Mumbai: The government will increase the buffer stock of sugar to five million tonnes for this year against the current two million tonnes in the wake of the bumper production expected this year.

The cabinet committee on economic affairs (CCEA) has approved a proposal by the agriculture ministry to increase the buffer stock of sugar by three million tonnes, finance minister P Chidambaram told reporters.

The enhanced buffer stock to five million tonnes would help cushion the impact of falling prices on sugar mills and cane growers following a glut in sugar supply, he said.

Also, to mitigate any difficulties that the sugar mills may face in paying cane arrears, the government has decided to reschedule bank loans to the industry and has set up a group of ministers to look into the problem.

"Sugar production in the country is estimated to touch 27.5 million tonnes this season (ending September). So, somebody has to stock the surplus sugar," he said, adding that the international prices of sugar too had registered a decline.

A committee chaired by NABARD executive director S K Mitra will consider rescheduling the loans, Chidambaram said, adding that the GoM will meet soon.

Domestic consumption of sugar in the country, the second largest producer of the commodity in the world, is estimated at 19 million tonnes. The bumper sugar production, coupled with a carry over stock of four million tonnes, would leave the country with excess stock of 13 million tonnes this year.

India is the world''s second largest sugar producer and biggest consumer of sugar.