Cabinet approves Rs4,500 cr package for sugar industry

The government today approved a Rs4,500-crore package for the sugar industry that includes over two-fold jump in production assistance to cane growers and transport subsidy to mills for exports of up to 5 million tonnes in the marketing year 2018-19.

The Cabinet Committee on Economic Affairs (CCEA) at its meeting today approved the food ministry’s proposal that seeks to address the surplus domestic stock and help sugar mills in clearing huge cane arrears of around Rs13,000 crore. 
The CCEA meeting, chaired by Prime Minister Narendra Modi approved measures involving total assistance of over Rs5,500 crore to support the sugar sector by way of offsetting cost of cane and facilitating export of sugar from the country, thereby helping to improve liquidity of sugar mills and enabling them to clear cane price arrears due to farmers.
The centre will provide assistance to sugar mills by way of expenditure towards internal transport, freight, handling and other charges to facilitate export during the sugar season 2018-19. This will be provided at Rs1,000 per tonne for mills located within 100 km from the ports, Rs2,500 per tonne for mills located beyond 100 km from the port in the coastal states and at Rs3,000 per tonne for mills located in other than coastal states or actual expenditure, whichever is lower. The total expenditure on this account is estimated to be about Rs1,375 crore.
In order to help sugar mills clear cane dues of farmers, the government has decided to provide financial assistance to sugar mills at the rate of Rs13.88 per quintal of cane crushed in sugar season 2018-19 to offset the cost of cane. This will, however, be provided only to those mills which fulfil the conditions as stipulated by the Department of Food and Public Distribution.
The total expenditure on this account would be about Rs4,163 crore, which will be borne by the government.
To ensure payment of sugarcane dues of farmers, both the assistance would be credited directly into the accounts of farmers on behalf of sugar mills against cane price dues payable to farmers against FRP, including arrears relating to previous years and subsequent balance, if any. Assistance shall be provided to those mills which will fulfil the eligibility conditions as decided by the government.
This is the second financial package to bail out the sugar industry after the centre announced a Rs8,500-crore package in June. 
With record production of 32 million tonnes in the 2017-18 marketing year(October-September) and a closing stock of 10 million tonnes as of end-September 2018, the industry is facing a glut-like situation.
Under its ‘Comprehensive Policy to deal with excess sugar production in the country’, the ministry has recommended offsetting the cost of sugarcane to sugar mills by increasing the production assistance paid to growers at Rs13.88 per quintal for the 2018-19 marketing year from Rs5.50 per quintal for this year.
With low global prices, the ministry has suggested helping mills to export 5 mt of sugar under the minimum indicative export quota (MIEQ) during 2018-19 by compensating the expenses towards internal transport, freight, handling and other charges.
The ministry has proposed a transport subsidy of Rs 1,000 per tonne for the mills located within 100 km from ports, Rs 2,500 per tonne for mills located beyond 100 km from the port in coastal states and Rs 3,000 per tonne for mills located in other than coastal states.
The production assistance will directly be credited into the sugarcane farmers’ account on behalf of the mills as part of the Government’s measures to clear the over Rs 13,500 crore arrears sugar mills owe to farmers.
India’s sugar output is set to increase further to 35 million tonnes in the next marketing year from 32 million tonnes in 2017-18. The annual domestic demand stands at 26 mt.
The government has taken a slew of measures to bail out sugar mills as well as cane farmers in the last one year. First, it doubled the import duty on sugar to 100 per cent and then scrapped the export duty on it. It also made it compulsory for millers to export two million tonnes of sugar even as global prices were low.
In June, the government had announced a Rs8,500-crore package for the industry, which included soft loans of Rs4,440 crore to mills for creating ethanol capacity. It will bear an interest subvention of Rs1,332 crore.
Early this month, the government had approved an over 25 per cent hike in the prices of ethanol produced directly from sugarcane juice for blending in petrol, to cut surplus sugar production and reduce oil imports.