To help clear massive cane arrears to farmers, the Centre is building a buffer sugar stock of 30 lakh tonnes, food and consumer affairs minister Ram Vilas Paswan said on Thursday. The move will cut the large inventory with sugar mills and help contain a slide in the prices of the sweetener and boost the mills’ margins. According to an estimate, the government will have to bear a carrying cost of Rs 1,200 crore a year for the proposed facility.
Although a new sugar package being firmed up by the government is learnt to include an interest subsidy of more than Rs 1,300 crore on loans to sugar mills to raise their ethanol production capacity, the minister did not confirm this. Paswan, however, said his ministry was considering “fresh options” to help cane growers. He said mills have so far refrained from exports though it is mandatory for them to ship out certain portion of their stocks. Earlier this month, the Centre approved production assistance of Rs 5.50 per quintal directly to cane farmers, a move that would lower the mills’ cane arrears.
Sources said the food ministry moved the proposal to create the buffer stock under a directive from the Prime Minister’s Office (PMO). NCP chief and former agriculture minister Sharad Pawar had raised the issue with Prime Minister Narendra Modi and sought his urgent intervention to deal with the current glut in the market.
The average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg, below the cost of production estimated at about Rs 36 per kg. According to Indian Sugar Mills Association (Isma), factories are losing as much as Rs 63 on purchase of each quintal of cane at fair and remunerative price (FRP) of Rs 255 a quintal, based on the Rangarajan panel’s linkage formula; hence the massive arrears. The Rangarajan panel had in 2012 suggested that farmers be paid 75% of mills’ realisations from sugar for cane supplies, or 70% of sales proceeds from sugar and other cane by-products like bagasse, molasses and pressmud.
Sugar mills’ financial health has worsened due to sharp fall in prices of the sweetener in the wake of a record production of 31.6 million tonnes so far in the 2017-18 season (October-September). Paswan also said the petroleum ministry was considering some proposed changes in ethanol policy.