Food Min proposes cane production-linked subsidy to farmers

For holistic development of the sugar sector, the Food Ministry has proposed direct payment of Rs 47.50 per quintal to growers out of total cane price of Rs 230 per quintal as production subsidy for 2015-16 season.
The ministry has circulated a cabinet note in this regard for inter-ministerial comments. It has proposed that the balance cane price of Rs 182.50 per quintal will be paid by millers.
At present, sugar mills have to pay the entire cane price, called fair and remunerative price (FRP), fixed by the Centre. The FRP for this season (October- September) has been fixed at Rs 230 per quintal. FRP is the minimum price that sugar mills have to pay to cane farmers.

"The Food Ministry has moved a cabinet note proposing a cane production-linked subsidy for this season keeping in view the long term development of the sector. Under this, the Centre will pay part of cane FRP directly to growers," sources said.
Of the cane FRP of Rs 230 per quintal, the ministry has proposed direct payment of Rs 47.50 per quintal as production subsidy to those farmers who have supplied sugarcane to mills that not only manufacture sugar but also ethanol, electricity and other products, the sources said.
The total subsidy, estimated at Rs 1,250 crore, would be paid from the Sugar Development Fund (SDF). The subsidy amount will be transferred to dedicated bank accounts of farmers to be opened by millers.

According to sources, the ministry has proposed subsidy to cane growers instead of exporters due to objections raised by some countries at the World Trade Organisation (WTO).

The cane production-linked subsidy, which is compatible with WTO regime, will offset cash-starved millers against cane cost and avoid piling up of cane arrears yet again this season, they said.
This will also provide some relief to millers as the government without giving any incentive has mandated them to export 4 million tonnes of surplus sugar in 2015-16 season.
Sugar export subsidy was given to millers in last two seasons to help them clear cane dues to farmers, but the same has been discontinued this time due to WTO objections.

Sugar millers are facing liquidity crisis due to fall in sugar prices in the wake of glut in domestic and global markets.
The country is estimated to produce sixth straight year of surplus sugar at 26 million tonnes this season.