Sugar bailout: Cabinet approves Rs 8,000 crore package, MSP at Rs 29 per kg

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Updated: June 6, 2018 3:44:59 PM

The Union Cabinet on Wednesday approved the bailout package of Rs 8,000 crore to sugar industry to ensure the cash-starved mills clear cane dues of Rs 22,000 crore.

Cabinet approves Rs 8,000 crore sugar bailout packageThe Union Cabinet on Wednesday approved the bailout package of Rs 8,000 crore to sugar industry. (Image: PTI)

The Union Cabinet on Wednesday approved the bailout package of Rs 8,500 crore to sugar industry to ensure the cash-starved mills clear cane dues of Rs 22,000 crore. This includes Rs 4,500 crore soft loan for building ethanol production capacity and creating a 3 million tonne stockpile to soak up excess supply. The Cabinet, headed by Prime Minister Narendra Modi, also fixed a Minimum Support Price (MSP) of Rs 29 a kg.

The Cabinet also approved a Rs 1,300 crore interest subversion on the loan to be provided for creating new ethanol production capacity as also expanding the existing one,” PTI reported quoting sources. Ethanol extracted from sugarcane will be used for blending in petrol and will provide cane farmers a remunerative price for their crop. Ethanol doping in petrol will also help the country cut its oil imports.

A bailout package has been worked out as sugar mills’ financial health has worsened due to sharp fall in prices following a record sugar production of over 31.6 million tonnes so far in the 2017-18 marketing year. Currently, the average mill price of sugar is in the range of Rs 25.6-26.22 per kg, which is below the cost of production.

Last month, the government had announced a Rs 1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments. The Centre has already doubled sugar import duty to 100% and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.

The bailout package likely includes sugar buffer stock of 3 million tonnes, interest subsidy on Rs 4,500 crore loan to mills for expansion and creation of new ethanol capacity among others. According to Bloomberg, raw-sugar futures have fallen about 26% this year, the biggest drop among 34 commodities.

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