Govt asks RBI to remove sugar from negative list as virus hits consumption

Such a move would spur infusion of fresh liquidity and working capital in sugar mills, facilitating speedy settlement of cane arrears

Virendra Singh Rawat Lucknow

2 min read Last Updated : May 26 2020 | 4:09 AM IST

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Against the backdrop of a drastic fall in sugar consumption because of the Covid-19-triggered lockdown and the accumulation of farmer arrears, the central government is set to advise the Reserve Bank of India (RBI) to remove the beleaguered sugar sector from its negative list.

This would pave the way for the infusion of fresh liquidity and working capital in sugar mills through an enhanced cash credit limit (CCL), thus facilitating speedy settlement of arrears.

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Last month, the UP sugar industry and Sugarcane Development Principal Secretary Sanjay R Bhoosreddy had written to the Union financial services secretary and the RBI, highlighting the challenges faced by the industry because of the lockdown and its impact on sugar demand, supply, storage space, etc.

Another letter was written to the Centre by Maharashtra State Cooperative Sugar Factories claimed sugar sales have dipped considerably owing to the “lockdown” of the cold drink/beverage industry, the ice cream sector, and sweet marts/halwai shops, thereby disturbing cash inflows of mills.

Following these letters, Vivek Shukla, director, sugar policy, department of food and public distribution, Union food and consumer affairs ministry, has written to the finance ministry to consider the stand of the UP government and Maharashtra mills, and to request the RBI for removing mills from the negative list, “which will ease working capital under the prevailing conditions/restrictions".

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The domestic sugar consumption has already gone down by nearly a million tonne (MT), while the industry is simultaneously facing headwinds in the segment of fuel-grade ethanol owing to the crash in the demand of petroleum products.

Cane farmers’ outstanding with sugar mills in UP, the country’s top sugar producer, has touched Rs 15,000 crore, even as crushing is still underway in a few factories.