The Centre may create a 3-million-tonne sugar buffer stock to help sugar mills to tide over the crisis triggered by overproduction, Union Food Minister Ram Vilas Paswan said on Thursday.

The glut in sugar production during the current 2017-18 season (September-October) has led to the sweetener price crashing to levels below cost of production.. This has resulted in ballooning sugarcane arrears to farmers to ₹22,000 crore. Sugar production this year is expected to be around 32 mt , 60 per cent higher than that in the last season.

Carrying cost

“We are considering the proposal to create a buffer stock of 3 mt,” Paswan told reporters during a press conference.

(Creating a buffer stock is a relief for sugar mills. They will hold the sugar but the government will bear the carrying cost including interest, warehousing and insurance estimated at about ₹ 1,215 crore.)

The Minister also hinted at the possibility of the Government paying an assistance of ₹7.70 to mills for every kg of sugar they export as the international prices are hovering low. “Also under consideration of the Government is giving some financial support to the mills that export sugar so that they can offset some of the losses that they incur because of lower global sugar prices,” the he said adding no decision has been taken yet.

In an order issued in March, the Government has allowed mills to export 2 mt under the Minimum Indicative Export Quota (MIEQ) scheme for the 2017-18 marketing year.

Support measures

Recently, the Indian Sugar Mills Association wrote to the Prime Minister’s Office, requesting it to announce a floor price for sugar as the prices of the sweetener continue to fall. According to a sugar industry official, mills are making heavy losses as ex-mill gate price is nearly 25 to 30 per cent lower than the cost involved.

The government has been taking various measures to help sugar mills so that they can clear cane arrears that they owe to farmers. The mounting cane dues can be a politically sensitive issue in the election year as it has been shown already in the bye-election just concluded. A combined opposition front wrested Kairana Lok Sabha seat (Uttar Pradesh) – a sitting seat of the ruling BJP – where sugarcane farmers are in formidable numbers when the result was announced on Thursday.

Apart from approving a production subsidy of ₹5.5 per quintal to be paid directly to sugarcane farmers on account of cane arrears, the Government had recently doubled sugar import duty to 100 per cent and scrapped export duty to encourage sugar exports.

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