FoodMin proposes Rs 47.5-55.5 a tonne direct subsidy to sugar cane farmers

Subsidy only for farmers offering cane to mills that make ethanol, power and other products apart from sugar

After much deliberation, the food ministry seems to have decided on the amount it proposes to directly transfer into the bank account of millions of sugar cane farmers from the 2015-16 crop season.

This first-time move would, if successful, allow similar experiments with other crops, like cotton. The central government would directly transfer the subsidy or incentive to growers.

Officials said the ministry had proposed direct payment of Rs 47.5-55.5 for each tonne or Rs 4.76-5.50 a quintal of cane sold by farmers to millers, of the total Fair and Remunerative Price (FRP, fixed by the Centre for each season) of Rs 230 a qtl for the season (October till the next September), with millers to pay the other Rs 225.24-224.25 per quintal.  

By the rough calculation, if the direct transfer is fixed at Rs 4.76 per quintal, the total subsidy outgo would be somewhere around Rs 1,250 crore, while if it is fixed at the top end of the band, the outgo would be around Rs 1,400 crore.

Officials said, by the proposal, only those sugar mills that have sold 80 per cent of their allocated export quota for the 2015-16 season would be eligible for this incentive from the central government.

The subsidy would be given only to farmers supplying their cane to those mills which not only make sugar but also ethanol, electricity and other products. Officials said the Centre might dig into the Sugar Development Fund or increase the cess on sugar to fund the outgo. The final amount would depend on what the finance ministry says. Views of the prime minister's office are also being solicited on the matter. At present, mills have to pay the entire FRP.

A sugar export subsidy was given to millers in the past two seasons to help them clear cane dues to farmers, but has been discontinued due to World Trade Organization objections. Millers are facing a supply glut at home and abroad.

The country is estimated to produce a sixth straight year of surplus sugar, at 26 million tonnes this season.