The government has decided to provide a production subsidy of Rs4.50 per quintal of cane crushed to offset cane cost, in order to ensure timely payment of cane dues in the current sugar season.
The subsidy will be paid directly to the farmers on behalf of the mills and this will be adjusted against the cane price payable to the farmers towards fair and remunerative price (FRP), including arrears relating to previous years.
Subsequent balance, if any, will be credited into the mill's account.
Priority will be given to settling cane dues arrears of the previous years.
The production subsidy is a performance incentive and will be provided to those mills which have exported at least 80 per cent of the targets notified under the MIEQ and in case of mills having distillation capacities to produce ethanol have achieved 80 per cent of the targets notified by the department under the EBP.
The government has notified mill-wise minimum indicative export quota (MIEQ) for export of sugar. A national grid allocating ethanol supplies to oil marketing companies (OMCs) by distilleries attached to sugar mills under ethanol blending programme (EBP) has been notified.
Sustained surpluses of production over domestic consumption in the last five years has led to subdued sugar prices, which has stressed the liquidity position of the industry leading to a build-up of cane price arrears. During sugar season 2014-15, the peak cane price arrears were Rs21,000 crore as of 15 April 2015.
The central government has, in the last one year, taken several steps to mitigate the situation and protect livelihoods of cane farmers.
To improve liquidity of sugar mills and facilitate payment of cane dues arrears, the Government had increased the export incentive on raw sugar from Rs3,300 per tonne to Rs4,000 per tonne in the sugar season 2014-15. Funds were allocated to support 1.4 million tonnes of raw sugar exports.
The government has also fixed remunerative prices for ethanol supplied for blending with petrol at Rs42 a litre. Blending targets under the ethanol blending programme (EBP) has been doubled to 10 per cent from 5 per cent earlier. The government also waived the excise duties on ethanol in the current sugar season resulting in Rs5 liter extra revenue realisation to incentivise ethanol supplies.
OMCs have contacted supplies of 1.03 billion litres of ethanol after first offer, which is a substantial increase compared to the 320 million litres contracted in the previous sugar season.
To further help the industry clear cane dues arrears, the government has disbursed soft loans to the extent of Rs4,047 crore. To ensure that farmers are paid their dues expeditiously, the financial assistance has been passed on directly to the cane growers by the banks after obtaining the list from the mills. Furthermore, the government has provided one year moratorium on this loan, and had offered to bear the interest subvention cost to the extent of Rs600 crore for the period.