The government would soon decide on the demand for creation of a buffer stock of sugar, food minister Ram Vilas Paswan said on Wednesday. Such a step has been sought by the industry to arrest a plunge in sugar prices and improve the ability of mills to clear cane dues that have crossed a record R21,000 crore.
Paswan said the government would take a view, considering the interest of all stakeholders, including farmers.
Earlier this month, a sugar industry delegation along with former food and agriculture minister Sharad Pawar had met Prime Minister Narendra Modi, requesting him to look into the crisis being faced by the sector owing to huge losses incurred by mills following a slide in sugar prices to six-year lows, and huge cane arrears. The delegation pressed for its demand that the government buy 10% of the country’s sugar production (over 2.7 million tonne) this marketing year through September at a price based on the fair and remunerative price (FRP) of cane fixed by the Centre to spur demand and the supply is held back from the market for two years.
In a letter submitted to Modi, Pawar had said: “To solve the immediate problems of the sugar sector, there is a need to improve both the liquidity of mills as also the ex-mill sugar prices, which, in turn, will ensure that our cane farmers get their dues. Both these objectives can be achieved by reducing the burden of surplus sugar from the mills.”
He added that the situation has been caused by five straight years of surplus production and an expected carry-over stock of 10 million tonne at the end of 2014-15. A plunge in prices overseas has also dented export prospects.
Industry executives say such a move would improve the cash flow of mills by around R8,500 crore, which will straightaway reduce the arrears to farmers. Otherwise, the industry fears that a quarter of them may not be able to start their crushing operations in 2015-16 sugar season, less than five months away.
The government recently decided to raise the import duty on sugar to 40% from 25% to discourage dumping of the sweetener from overseas should the prices fall further. It also agreed to remove a 12.36% exercise duty on ethanol, meant for blending with petrol, from 2015-16 to improve the cash flow of mills. Ethanol is a by-product of cane and the sugar industry is its biggest producer.