Modi meets ministers to discuss sugar sector crisis

By: | Published: August 2, 2015 12:02 AM

Prime Minister Narendra Modi on Saturday held a meeting with key ministers to discuss the current crisis in the sugar sector and measures required...

Prime Minister Narendra Modi on Saturday held a meeting with key ministers to discuss the current crisis in the sugar sector and measures required in the longer term to prevent its recurrence. The late-evening meeting was attended by food minister Ram Vilas Paswan, finance minister Arun Jaitley, transport minister Nitin Gadkari and agriculture minister Radha Mohan Singh.

The industry has been bleeding as sugar prices have crashed to seven-year lows, while the cane prices have been fixed at exorbitantly elevated levels by state governments like Uttar Pradesh and even the Centre. Consequently, mills and co-operatives across the country owed nearly Rs 18,112 crore to farmers up to the end of June for cane purchases.

Among the suggestions that are being looked into by the government to address the issue are the promotion of sugar exports as well as the blending of ethanol, a cane by-product, with petrol, sources said. The government may also consider incentivising refined sugar exports, sources said.

Currently, while the government is offering a subsidy of Rs 4,000 per tonne on limited raw sugar exports this marketing year through September, there is no subsidy on white sugar exports. Since global prices have crashed due to a glut in major producing countries and a depreciation of the Brazilian currency, even the raw sugar export with the subsidy is hardly taking place now. The government may use funds accrued from the sugar cess to compensate mills for potential losses from exports.

In May, a sugar industry delegation led by former Union agriculture minister Sharad Pawar had met Modi and demanded that the government buy 10% of the country’s sugar production 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 ensure that much of supply is held back from the market for two years. However, the government rejected the demand subsequently and instead announced a loan package of Rs 6,000 crore in June with a 10% interest subsidy for one year. The industry was disappointed with the decision, as it didn’t address the core issue of the absence of a linkage formula between the price of cane and its by-products, as is prevalent in most cane-producing nations, and a sugar glut in the domestic market.

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