To ensure timely payment of cane dues in the current sugar season, Union Cabinet today approved the decision to provide a production subsidy @ of Rs. 4.50 per quintal of cane crushed to offset cane cost.
The said subsidy shall be paid directly to the farmers on behalf of the mills and be adjusted against the cane price payable to the farmers towards Fair and Remunerative Price (FRP) including arrears relating to previous years. Subsequent balance, if any, shall be credited into the mill’s account. Priority will be given to settling cane dues arrears of the previous years.
“This decision is significant as it means that the Government is no longer shying away from owning up the FRP it fixes for sugarcane, by directly contributing for a part of the cane price, instead of continuously burdening the millers. It will reduce industry’s liabilities towards cane to that extent, reducing a part of its losses,” Director General of Indian Sugar Mills Association Abinash Verma said.
“This concept of the Government to bridge the gap, at least partially, between what the sugar mills cane pay to farmers as per their revenue realization, and what the Government wants to give to farmers, will help to reduce cane price arrears, he added.
However, at current low sugar prices, the losses will be more than Rs. 1100 crore and, therefore, if sugar prices do not improve to cover costs during the season, the industry and farmers may seek further help from the Government’s budget, the ISMA said..
Sustained surpluses of production over domestic consumption in the last five years has led to subdued sugar prices, which has stressed the liquidity position of the industry leading to a build up of cane price arrears. During sugar season 2014-15, the peak cane price arrears were Rs.21,000 crore as on April 15, 2015.
The Central Government has, in the last one year, taken several steps to mitigate the situation and protect livelihoods of cane farmers. To improve liquidity of sugar mills and facilitate payment of cane dues arrears, the Government had increased the export incentive on raw sugar from Rs 3300/MT to Rs. 4000/MT in the sugar season 2014-15. Funds were allocated to support 14 lac MT (LMT) of raw sugar exports.
The Government has also fixed remunerative prices for Ethanol supplied for blending with petrol (Rs.42/liter). Blending targets under the Ethanol blending program (EBP) has been scaled up from 5 to 10 percent. The Government has also waived the excise duties on ethanol in the current sugar season resulting in Rs.5/ liter extra revenue realization to incentivize ethanol supplies. As a result, supplies of 103 crore Litre of ethanol was contracted by the OMCs after first offer; which is a substantial increase as compared to 32 crore Litre in the previous sugar season.
To further help the industry clear cane dues arrears, the Government has disbursed soft loans to the extent of Rs. 4,047 crore. To ensure that farmers are paid their dues expeditiously, the financial assistance has been passed on directly to the cane growers by the banks after obtaining the list from the mills. Furthermore, the Government has provided one year moratorium on this loan, and will bear the interest subvention cost to the extent of Rs. 600 crore for the said period.