Govt to Announce Rs 7,000 Crore for Sugar Mills as Cane Arrears Touch Rs 22,000 Crore

Arrears to be paid by mills to sugarcane farmers have come down to Rs 2,700 crore this year so far from a peak of Rs 22,000 crore, thanks to several steps taken to boost liquidity of sugar manufacturers, the government said today.

Cane arrears had touched Rs 22,000 crore in April of the 2014-15 sugar season (October-September) as sugar prices were subdued due to surplus sugar production for last five years.

“The measures taken by the government to improve liquidity of sugar mills enabling them to clear cane price dues of farmers, have a salutary effect on reduction of cane price arrears for the 2014-15 sugar season,” the Consumer Affairs, Food & Public Distribution Ministry said in a statement.

Last month, the government had announced a Rs 1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments.

Sugar mills are unable to make payments to cane growers as their financial health has worsened due to a sharp fall in sugar prices after a record production of 31.6 million tonne (MT) so far in the 2017-18 season (October-September).

Maximum cane dues of more than Rs 12,000 crore are in Uttar Pradesh alone, the country’s biggest sugarcane producing state.

According to reports on News18, sources, the government has worked out a slew of measures to ensure farmers’ dues are cleared by mills. “A bailout package of Rs 7,000 crore has been proposed,” they added.

The food ministry has proposed creation of a buffer stock of 3 million tonnes of sugar. The carrying cost of the sweetener would be borne by the government which is estimated to cost the exchequer around Rs 1,300 crore, they said.

Besides setting up of the buffer stock, the food ministry has proposed fixing minimum ex-mill sale price at around Rs 30 per kg, reintroducing the monthly release mechanism and imposing stock limits on mills by fixing quota for each mill.

The interest subsidy itself would cost Rs 1,200 crore to the government, the source added. The petroleum ministry is also looking at raising ethanol price so that mills make payment to farmers at the earliest.

Presently, the average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg, which is below the cost of production. 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.