PM asks Pawar-led panel to end sugar crisis

Decision taken after all-party delegation and a team of cooperative millers met Prime Minister earlier in the day

With the crisis in the Indian sugar sector showing no signs of abating, Prime Minister Manmohan Singh on Tuesday directed a high-level committee headed by Agriculture Minister Sharad Pawar to address the sector’s concerns at the earliest.

“We had a fruitful discussion with the Prime Minister and submitted a memorandum highlighting the problems being faced by sugar industry in Maharashtra and elsewhere and the PM has assured us he will instruct Agriculture Minister Sharad Pawar and others to look into the demands soon,” Maharashtra Chief Minister Prithviraj Chavan, who led an all-party delegation from the state to meet the PM told reporters.

Earlier in the day, Chavan had met a delegation of private millers from Uttar Pradesh.

Maharashtra and Uttar Pradesh account for more than 80 per cent of the country’s annual sugar production. Sugar sector in both the states are mired in financial problems due to escalation in production costs, accentuated by a sharp fall in domestic sugar prices on account of surplus supplies, pushing up the cane arrears to over Rs 3,400 crore. Finance Minister P Chidambaram and Civil Aviation Minister Ajit Singh are the other members of the high-level committee.

Meanwhile, in a related development, food ministry officials said the government will soon seek Cabinet nod for providing interest-free loans to cash-starved sugar mills to help them meet working capital requirements. “Our department is considering a proposal of interest- free loan scheme for the sugar industry. We are preparing a Cabinet note,” Food Secretary Sudhir Kumar told PTI.

On raising the duty drawback rates on exports and lowering the period for re-export of imported sugar to three months from 18 months, Kumar said: “These issues are being examined by the commerce ministry.”

Banks are wary of giving loans to sugar mills due to their poor financial condition, Kumar said. If banks come forward, we will pay the interest accrued on loans from the sugar development fund, which would be around Rs 300-400 crore,” said another official.

In Uttar Pradesh, mills have refused to operate as they are unhappy with the high cane price of Rs 280 a quintal fixed by the state for 2013-14 marketing year (October-September). Mills say they cannot pay more than Rs 225 a quintal.

According to Indian Sugar Mills Association, the country's total sugar production is estimated at 25 million tonnes for the 2013-14 marketing year, slightly higher than last year’s 24.5 million tonnes.