Cabinet approves Rs 8,000-cr bailout for sugar mills; sets cane MSP at Rs 29 per kg

The union cabinet on Wednesday approved a bailout package of Rs8,000 crore to the sugar industry to ensure that cash-strapped mills clear cane dues of Rs22,000 crore to farmers.

The package includes Rs4,500 crore in soft loans for building ethanol production capacity and creating a 3 million tonne stockpile to soak up excess supply.
The cabinet headed by Prime Minister Narendra Modi also fixed the minimum support price (MSP) of sugar cane at Rs29 a kg.
The cabinet also approved a Rs1,300 crore interest subversion on the loan to be provided for creating new ethanol production capacity as also expanding the existing one,” PTI reported quoting sources.
Ethanol extracted from sugarcane will be used for blending in petrol and will provide cane farmers a remunerative price for their crop. Ethanol doping in petrol will also help the country cut its oil imports.
A bailout package has been worked out as sugar mills’ financial health has worsened due to sharp fall in prices following a record sugar production of over 31.6 million tonnes so far in the 2017-18 marketing year. Currently, the average mill price of sugar is in the range of Rs25.6-26.22 per kg, which is below the cost of production.
Last month, the government announced a Rs1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments. The centre has already doubled sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.
The bailout package likely includes sugar buffer stock of 3 million tonnes, interest subsidy on Rs4,500 crore loan to mills for expansion and creation of new ethanol capacity, among others.