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SUGAR

CCEA approves assistance worth Rs 5,500-crore+ to support sugar sector
Thursday, 27 September, 2018, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
The Cabinet Committee on Economic Affairs (CCEA), chaired by prime minister Narendra Modi, has approved measures involving total assistance amounting to over Rs 5,500 crore to support the sugar sector by way of offsetting the cost of cane and to facilitate the export of sugar from the country to improve the liquidity of the industry, enabling them to clear the cane price arrears of farmers.

In a statement, the government said that due to excess carryover stocks and indication of similar excess production in the ensuing sugar season 2018-19, the liquidity problem of the sugar mills is likely to persist in the coming sugar season (SS) too. As a result, the cane price arrears of sugarcane farmers may also peak at an unprecedented high level.

“The government has decided to provide assistance to sugar mills by defraying expenditure towards internal transport, freight, handling and other charges to facilitate export during SS 2018-19 at Rs 1,000 per metric tonne (MT) for the mills located within 100km from the ports, at Rs 2,500 per MT for the mills located beyond 100km from the port in the coastal states and at Rs 3,000 per MT for mills located in other than coastal states or actual expenditure, whichever is lower. The total expenditure on this account would be about Rs 1,375 crore which will be borne by the government,” said the statement.

Further, in order to help sugar mills to clear cane dues of farmers, the government has decided to provide financial assistance at the rate of Rs 13.88 per quintal of cane crushed in SS 2018-19 to sugar mills to offset the cost of cane. The assistance shall be provided to only those mills which fulfil the conditions as stipulated by the Department of Food and Public Distribution. The total expenditure on this account would be about Rs 4,163 crore which will be borne by the government.

Also, to ensure the payment of sugarcane dues of farmers, both the assistance would be credited directly into the accounts of farmers on behalf of sugar mills against cane price dues payable to farmers against the fair and remunerative price (FRP), including arrears relating to previous years, and the subsequent balance, if any, would be credited to the mill’s account. Assistance shall be provided to those mills which will fulfil the eligibility conditions as decided by the government.

Abinash Verma, director general, Indian Sugar Mills Association (ISMA), reacting to this decision in a statement, said, “The Government’s decision to pay Rs 13.88 per quintal of sugarcane as part of FRP directly to the farmers will reduce the industry’s cane price liability by around five per cent over the next year’s FRP of Rs 275 per quintal of sugarcane. This is the largest financial assistance towards FRP ever given by the Government of India and will substantially reduce expenditure and working capital requirement of sugar mills in the next year. The second decision to give Rs 250-300 per quintal of sugar exports as reimbursement of internal transport freight, handling charges etc. on the sugar exports will encourage sugar mills to export sugar and reduce the surplus sugar inventory that they would be carrying and building up next year. The sugar industry needs to export maximum quantity of sugar over the next 12 months, not only to help generate funds to pay to the farmers, but also reduce avoidable carrying costs on such huge inventory.” He added that the government should be making export compulsory.

Verma said, “As already requested by us, we would eagerly await announcement of the government to make the export compulsory for each sugar mill, along with procedures for strong implementation to ensure that each sugar mill fulfils its individual export target.”

The government’s background note on the sugar sector said that due to depressed market sentiments and crash in sugar prices, the liquidity position of sugar mills was adversely affected in SS 2017-18 leading to the accumulation of cane price dues of sugarcane farmers, which reached an alarming level of about Rs 23,232 crore in the last week of May 2018.

In order to stabilise the sugar prices at a reasonable level and to improve the liquidity position of the mills, thereby enabling them to clear the cane price arrears of farmers, for the current SS 2017-18, the Central Government has taken the following measures in past six months:
?    Increased custom duty on import of sugar from 50 to 100 per cent to check any import in the country
?    Withdran the custom duty on export of sugar to encourage sugar industry to start exploring the possibility of export of sugar
?    Allocated mill-wise minimum indicative export quotas (MIEQ) of 20 lakh metric tonne (LMT) of sugar for export during SS 2017-18
?    Re-introduced the Duty-Free Import Authorization (DFIA) Scheme in respect of sugar to facilitate and incentivise the export of surplus sugar by sugar mills
?    Extended financial assistance to sugar mills at Rs 5.50 per quintal of cane crushed during SS 2017-18 to offset the cost of cane
?    Notified the Sugar Price (Control) Order, 2018 directing that no producer of sugar shall sell white/refined sugar at the factory gate at a rate below Rs 29 per kg; along with imposition of stock holding limits on mills
?    Created buffer stock of 30LMT of sugar with effect from July 1, 2018, to be maintained by sugar mills for one year, for which the government will bear a carrying cost of about Rs 1,175 crore
?    In order to augment ethanol production capacity, and thereby, also allow divergence of sugar for production of ethanol, approval has already been granted for extension of soft loan of Rs 4,440 crore through banks to the mills for setting up new distilleries/expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by the Central Pollution Control Board for Zero Liquid Discharge for which the government will bear interest subvention of Rs 1,332 crore

As a result of the above measures, the all-India average ex-mill prices of sugar increased from the range of Rs 24-27 per kg to Rs 30-33 per kg; and all-India cane price arrears of farmers have also come down to Rs 12,988 crore from the peak arrears of about Rs 23,232 crore on State Advised Price (SAP) basis for SS 2017-18. On FRP basis, all-India cane price arrears of farmers have come down to Rs 5,312 crore from the peak arrears of about Rs 14,538 crore.
 
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