1. PM Narendra Modi steps in to sweeten sugar mills’ bitter pill

PM Narendra Modi steps in to sweeten sugar mills’ bitter pill

The Indian Sugar Mills Association has asked the government to buy 2.6-2.7 million tonnes of sugar at Rs 31 per kg (based on FRP cost of cane) so that the fall in domestic prices can be arrested.

By: | New Delhi | Updated: April 29, 2015 5:03 AM
Narendra Modi

With cane arrears at a record R21,000 crore, PM Narendra Modi has stepped in to defuse the crisis in the sector. (PTI)

With cane arrears at a record R21,000 crore, PM Narendra Modi has stepped in to defuse the crisis in the sector.

Modi convened a meeting of key ministers late on Sunday in which several proposals — including creating a buffer stock to check the slide in sugar prices, raising the import duty to 40% from 25% now, loan restructuring, promotion of ethanol blending with petrol and export subsidy on white sugar — were discussed, sources told FE. The move aims to improve the capacity of sugar mills to clear the arrears. A decision is likely soon, they added.

The proposals were broadly based on the recommendations made by cane producing states as well as farmers at a two-day meet with the Union food ministry earlier this month. The meeting with the PM was attended by finance minister Arun Jaitley, home minister Rajnath Singh, food minister Ram Vilas Paswan, agriculture minister Radha Mohan Singh, transport minister Nitin Gadkari and commerce minister Nirmala Sitharaman, said the source.

The sugar industry is in the midst of an unprecedented crisis as prices are hovering around six-year lows in many regions, while raw material costs have grown consistently due to disproportionate hikes in state-fixed cane prices.

A glut in the domestic market due to a fifth straight year of surplus production through 2014-15 and a plunge in global prices have exacerbated the fall in local sugar prices, straining mills’ finances.

Separately, Paswan said on Tuesday that the Centre would take “appropriate decision at appropriate time”, without giving a particular time frame to announce any incentives. He added the government had already provided incentives worth Rs 4,000 per tonne for raw sugar exports up to 1.4 million tonnes in the current marketing year through September. However, industry executives feel less than one-fourth of the approved quantity may be exported this season, mainly due to a delay in the announcement of the subsidy and a further drop in global prices.

However, sources said the government is yet to decide whether it would create a buffer stock of sugar or build a strategic reserve. Should it accede to the industry demand to create the strategic reserve, it has to buy 10% of the country’s production at a rate based on the fair and remunerative price (FRP) of cane. However, if the government chooses to build a buffer stock of sugar, mills would continue to be the owner of the stocks and the government would provide just the carrying costs of inventory.

The Indian Sugar Mills Association has asked the government to buy 2.6-2.7 million tonnes of sugar at Rs 31 per kg (based on FRP cost of cane) so that the fall in domestic prices can be arrested. Ex-factory sugar prices in Uttar Pradesh were hovering around Rs 2,600 per quintal, while in Maharashtra, the prices have been ruling at Rs 2,250 per quintal, much lower than the cost of production. Moreover, the industry has been seeking a restructuring of loans worth over Rs 36,000 crore.

The PM’s meeting also discussed the problems being faced by farmers in selling wheat to state-run agencies like Food Corporation of India. Although the government has relaxed procurement norms in states like Uttar Pradesh, Punjab, Haryana and Madhya Pradesh that have been affected by unseasonal showers, farmers are still facing problems, as the crop got damaged beyond the permissible limit.

Meanwhile, the commerce ministry has relaxed norms to allow any trader or entity to export sugar to the EU and the US under a preferential quota system and take advantage of the low tariff. Earlier, the government had designated the Indian Sugar Exim Corporation, formed by two leading sugar industry associations representing both private mills and cooperatives. Under the quota system, Indian exporters can ship out 10,000 tonnes to the EU and 8,200 tonnes to the the US. ISMA director general Abinash Verma expressed dismay and said the decision would benefit only “a few petty traders at the cost of the sugar industry”.

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