Govt to spend Rs1,674 cr to create 4 million tonne sugar buffer stock
25 July 2019
The Cabinet Committee on Economic Affairs (CCEA) on Tuesday approved the creation of buffer stock of 4 million metric tonnes of sugar for one year at an estimated maximum expenditure of Rs1,674 crore for this purpose.
However, based on the market price and availability of sugar, this may be the Department of Food and Public Distribution may review the need for creation of buffer stock any and withdraw or modify the plan.
The reimbursement under the scheme would be met on quarterly basis to sugar mills, which would be directly credited into farmers’ account on behalf of mills against cane price dues and subsequent balance, if any, would be credited to the mill’s account.
The move is aimed at improving the liquidity of sugar mills by a reduction in sugar inventories, stabilisation in sugar prices by alleviating of price sentiments in domestic sugar market and thereby facilitating timely clearance of cane price dues of farmers.
It will benefit sugar mills in all sugarcane producing states, by way of clearing sugarcane price arrears of sugar mills, an official release stated.
In the wake of sugar production during sugar season 2017-18 (October-September) and sugar season 2018-19, and given the over-leveraged position in the industry and liquidity crunch, interventions have been taken from time to time by the government to improve liquidity of the sugar mills, enabling them to clear cane price arrears of farmers and also to stabilise sugar prices in the domestic market.
Creation of buffer stock of 3 million tonnes of sugar for one year from 1 July 2018 to 30 June 2019 was one of the various interventions which were made by the government. Accordingly, the scheme for creation and maintenance of buffer stock was notified on 15 June 2019.
The buffer subsidy scheme announced in sugar season 2017-18 has expired on 30 June 2019. However, ensuing sugar season 2019-20 is likely to commence with huge carryover/opening stock. As such, in order to maintain demand supply balance and to stabilize sugar prices, the government has decided to create a buffer stock of 4 million tonnes of sugar for one year from 1 July 2019 to 31 July 2020 for which government would be reimbursing the carrying cost of about Rs1,674 crore to participating sugar mills. This would improve the liquidity position of sugar mills.