Centre intervenes to clear payment of arrears to cane farmers

To help the sugar industry clear its cane arrear dues, the cabinet committee on economic affairs chaired by the prime minister today approved the proposal to provide soft loans upto  Rs6,000 crore to the sugar industry.

The cabinet committee has provided a one-year moratorium on this loan, and will bear the interest subvention cost to the extent of Rs600 crore for the year.

To ensure that farmers are paid their dues promptly, the government has mandated that banks will obtain from the sugar mills, the list of farmers with their bank account details to the extent of the cane dues are to be paid to them.

The dues will be paid directly into the account of the farmers on behalf of the sugar mills.

IF there is a balance after the farmers have been paid, it will then be credited into the mill account.

Further, in order to incentivise the mills to clear their dues, the CCEA has also decided that the approved soft loans will be provided to those units, which clear at least 50 per cent of their outstanding arrears before 30th June, 2015.

Fair and remunerative price (FRP) of sugarcane is fixed by the centre keeping in mind the recommendations of the Commission for Agricultural Costs and Prices, which for the current sugar season, is Rs220 per quintal.

Some state governments declare state advisory price, which is above the FRP.

Sustained production surpluses over domestic consumption in the last four years has led to subdued sugar prices. A similar situation prevails in international markets.

This has stressed the liquidity position of the industry leading to a build up of cane price arrears. In the current sugar year (October 20014-September 2015), the cane price arrears are approximately Rs21,000 crore.

The centre says it has taken several steps in the last one year to mitigate the situation and protect the livelihoods of cane farmers.

To improve the liquidity of sugar mills and facilitate payment of cane arrear dues, the government has increased the export incentive on raw sugar from Rs3,200 per metric tonnes to Rs4,000 metric tonnes. Funds have been allocated to support 14 lakh metric tonnes of raw sugar exports as against 7.5 lakh metric tonnes achieved last year.

The government has also fixed remunerative prices for ethanol supplied for blending with petrol, dismantling the tender-based price discovery procedures.

Prices were fixed at Rs48.50 to Rs49.50 per litre depending on distance from the depot thereby effectively giving Rs.42 per litre to the mill as against Rs32 per litre last year.

As a result, the supply of ethanol, has risen from about 32 crore liters per year to  83 crore liter per annum.

It has also been decided to waive the excise duties on ethanol in the next sugar season to further incentivise ethanol supplies for the blending program. This would further increase the ex mill price of ethanol and help improve the liquidity of the industry and enable them to clear the cane price arrears, the government has also increased the import duty to 40 per cent, and abolished the Duty Free Import Authorization Scheme.

To prevent possible leakages of sugar in the domestic markets, the Government has also reduced the export obligation period from 18 months to 6 months under the Advanced Authorization Scheme.