Cabinet may consider Rs 4,500-cr package to sugar sector on Wednesday

The Cabinet is likely to consider Wednesday the Rs 4,500 crore package for the cash-starved sugar sector, which includes doubling production assistance to growers and transport subsidy for export up to 5 million tonnes in the next marketing season starting October, sources said.

With assembly elections due in some states and upcoming general polls in mid-2019, the government has worked out a second package to bail out the sugar industry which is facing a glut-like situation because of record production of 32 million tonnes in the 2017-18 marketing year that ends this month.

The last financial assistance announced in June was to the tune of Rs 8,500 crore.

"The Cabinet Committee on Economic Affairs (CCEA) is scheduled for tomorrow and the Food Ministry's 'Comprehensive policy to deal with excess sugar production in the country' is on the agenda of the meeting," the sources said.

Under the proposed policy, the ministry has recommended offsetting cost of sugarcane to sugar mills by increasing the production assistance paid to growers to Rs 13.88 per quintal for the 2018-19 marketing year (October-September) from Rs 5.50 per quintal for this year.

With low global prices, the ministry has suggested helping mills to export 5 million tonnes of sugar under the Minimum Indicative Export Quota (MIEQ) in the 2018-19 marketing year by compensating expenditure towards internal transport, freight, handling and other charges.

Sources said the ministry has proposed a transport subsidy of Rs 1,000 per tonne for the mills located within 100 km from ports, Rs 2,500 per tonne for mill located beyond 100 km from the port in coastal states and Rs 3,000 tonnes per tonne for mill located in other than coastal states.

Like in the current year, the production assistance will directly be credited into the sugarcane farmers' account on behalf of the mills as part of the government's measures to clear more than Rs 13,500-crore in arrears sugar mills have towards farmers.

Sources said the government will have to bear about Rs 4,500 crore on account of these measures to help sugar mills and cane farmers.

These steps will enable mills to boost sugar exports and clear cane arrears, which currently stand at Rs 13,567 crore. Mills in Uttar Pradesh owe the maximum at Rs 9,817 crore to cane farmers.

India's sugar output is set to increase further to 35 million tonnes in the next marketing year, from 32 million tonnes this year. The annual domestic demand stands at 26 million tonnes. The opening stock of sugar is estimated at 10 million tonnes on October 1.

The government has taken a slew of measures to bail out sugar mills as well as cane farmers in the last one year.

First, it doubled the import duty on sugar to 100 per cent and then scrapped the export duty on it. It also made it compulsory for millers to export two million tonnes of sugar even as global prices were low.

In June, the government had announced a Rs 8,500-crore package for the industry which included soft loans of Rs 4,440 crore to mills for creating ethanol capacity. It will bear an interest subvention of Rs 1,332 crore for this.

The Centre had also announced assistance of Rs 5.50 per quintal of cane crushed, amounting to Rs 1,540 crore to mills. Around Rs 1,200 crore was allocated for the creation of 3 mt buffer stock of sugar. The minimum selling price of the sweetener has been fixed at Rs 29 per kg.

Early this month, the government had approved an over 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol, in a bid to cut surplus sugar production and reduce oil imports.

The CCEA raised the procurement price of ethanol derived from 100 per cent sugarcane juice to Rs 59.13 per litre from the current rate of Rs 47.13.

The price for ethanol produced from B-heavy molasses (also called intermediary molasses) was hiked to Rs 52.43 a litre from the current Rs 47.13, but that for ethanol produced from C-heavy molasses was reduced marginally to Rs 43.46 from Rs 43.70.