GoM on sugar meets today

Chief Ministers of UP, Maharashtra, TN, Karnataka may also participate in the deliberations, but it has not been confirmed

A newly constituted informal group of ministers (iGoM) is meeting today to discuss a bailout package for cash-starved sugar mills and to ensure timely payments to cane growers. The meeting assumes importance as Uttar Pradesh government tried to end a stalemate between cane growers and sugar mills by retaining state-advised price for canes to Rs 280 a quintal.

Chief Ministers of Uttar Pradesh, Maharashtra, Tamil Nadu and Karnataka may also participate in the deliberations, but it has not been confirmed.

The iGoM was set up Prime Minister Manmohan Singh last month to look into the issues concerning the sugar industry including the interest-free loans.

Agriculture minister Sharad Pawar is heading it. Besides, finance minister P Chidambaram, petroleum minister Veerappa Moily, food minister K V Thomas and civil aviation minister Ajit Singh are members of the group.

The Prime Minister has directed the GoM to come up with a solution to support the industry so that they are able to make timely sugarcane payment to growers.

Farmers in Maharashtra and Karnataka are demanding Rs 300 per quintal for sugarcane, while Uttar Pradesh has insisted that mills pay Rs 280 per quintal this year.

With low sugar prices, mills are worried over making payments and fear that the arrears could go up to Rs 15,000 crore, from the current Rs 3,400 crore, by April next year.

Faced with liquidity crunch, the sugar industry has demanded interest-free loans for working capital requirement, hike in import duty, export subsidies among others. The industry is grappling with financial problems due to high cost of production and low sugar prices in the wake of surplus production in the last few years.

As against the domestic demand of 23.5 million tonne, the government sees the country's sugar output at 24.4 million tonne this year - lower than the industry's estimate of 25 million tonne.