Govt to consider buffer stock for sugar

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New Delhi | Published: April 17, 2015 12:06:31 AM

After a two-day deliberation involving farmers as well as states on how to get cane arrears cleared at the earliest...

After a two-day deliberation involving farmers as well as states on how to get cane arrears cleared at the earliest, the Union food ministry has decided to take up seven proposals — including creating a buffer stock of sugar by the government and raising an import duty on the sweetener to 40% from the current 15% — for further consideration, food minister Ram Vilas Paswan said on Thursday.

The proposals also include incentives for white sugar exports, restructuring of interest-free loans, direct central assistance to farmers and extending credit from the Sugar Development Fund for ethanol production, modernisation of mills and co-generation and permission to produce ethanol directly from molasses. Most of these suggestions were made by producing states. Cane dues owed to farmers across the country hit a record R19,244 crore as of March 31.

An informal panel of ministers, including Paswan, petroleum minister Dharmendra Pradhan and transport minister Nitin Gadkari, would discuss these proposals at length — aimed at improving sugar mills’ capacity to clear cane arrears — and submit their final recommendations to the Prime Minister’s Office, Paswan said after the meeting.

Although the Centre has promised all possible help to get the arrears cleared, it has asked the producing states to take appropriate step for this purpose.

Some of the major producing states such as Uttar Pradesh, Maharashtra and Karnataka have asked the Centre to create a buffer stock to the tune of 10% of the country’s annual production, which would be roughly 2.6 million tonne if the Centre agrees to implement it, and that, too, in the current season itself. Such a step could halt a slide in the price of sugar and prevent the cash-starved mills from incurring disastrous losses.

After his meeting with farmer leaders on Wednesday, Paswan had said he would write to finance minister Arun Jaitley to raise the import duty on sugar to stop cheaper inflows from overseas.

However, he had also conceded that even at the 25% duty, not much of imports were taking place. But a miller had said hiking the duty would improve sentiments in the market. “As long as a window available to source sugar from abroad, domestic prices won’t recover. So a prohibitive duty of 40% will be the first step towards halting the crash in domestic sugar prices.”

Mills have been struggling to clear cane arrears as a crash in global sugar prices and plentiful supplies in the domestic market following a surplus production for a fifth straight year through 2014-15 have caused a slide in domestic sweetener rates, while cane prices were raised substantially by the authorities.

Ex-mill prices of sugar have fallen to R21-24/kg in the country, while the cost of production has gone up to R36/kg, thanks to high prices of cane fixed by states like Uttar Pradesh. Banks have cut down on lending to the cash-starved sector for fears of a spurt in bad loans, further worsening the problem of mills.

The Centre earlier this year extended a subsidy of R4,000 per tonne of raw sugar up to 1.4 million tonne to improve the cash-flow of the millers, but the outbound shipments have come to a halt due to a plunge in global prices.

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