The ailing sugar industry can expect some respite with the group of ministers (GoM) constituted to look into the relief package for the sugar industry convening its first meeting on July 18 to discuss the proposed sops to the sector.
The GoM, headed by external affairs minister Pranab Mukherjee, is expected to consider rescheduling bank loans to the industry, extending the export obligation period under the advance licence scheme, extending the export subsidy, which expires in September, making 5% ethanol blending a must for all states and possibly increasing it to 10% and re-working cane pricing, said a food ministry official.
The sugar industry has been facing a slump in sugar prices as there has been a record sugar production of 28 million tonne, an increase of 8.8 million tonne from 19.2 million tonne in the 2005-06 season (October-September). The glut in the market has led to a drastic fall in the prices of sugar, which have gone below the cost of production.
This has led to an accumulation of Rs 2,200 crore as cane arrears in Uttar Pradesh, which has led to the mills asking for rescheduling of loans to pay off cane arrears.
Under the advance licence, various sugar companies had imported 2.6 million tonne duty-free raw sugar between 2002-03 and 2004-05 sugar seasons, with an obligation to re-export it within two years. Of the above, 1.9 million tonne has already been exported, while another 700,000 tonnes remains to be shipped.
However, because the sugar was imported duty free it is not eligible for the export subsidy under open general licence. Thus exporting sugar under AL has become disadvantageous.
The government has already made a 5 million tonne buffer valid for two years for the sugar industry, which had given some respite to the beleaguered sector. However, industry watchers have said that the buffer alone would not be enough to bail out the industry.