Moving to address the crisis in the sugar belt, especially in western Uttar Pradesh where it became a poll issue and saw the ruling BJP being defeated in Kairana last week, the Centre is all set to announce a set of relief measures for sugarcane farmers.
Government sources said a package of around Rs 8,000 crore may be announced to reduce the stress in the sugar industry with an eye on clearing the dues of sugarcane farmers.
The first measure in the package, sources said, will include creation of a buffer stock of 30 LMT (lakh metric tonnes). This quantity of sugar will remain in the godowns of mills, but the entire carrying cost (towards interest, storage and insurance charges) of around Rs 1,200 crore would be met by the government. This should improve the liquidity of mills, enabling them to pay farmers.
Another part of the package, sources said, is likely to be a scheme, worth around Rs 4,400 crore, to increase ethanol production capacity in the country. This will help in diversion of sugarcane for ethanol production in a surplus season to facilitate timely payment of sugarcane dues to farmers.
In addition, the government is looking to set a minimum price for sale of sugar at around Rs 29/kg to help the sugar industry. This is likely to be clubbed with a mechanism to ensure that mills don’t sell sugar beyond a certain quantity. Each mill will be assigned a maximum quota of sugar they can sell every month. This, along with the 30 LMT buffer stock, will regulate supplies in the market and help prop up sugar prices, sources said.
During the Kairana bypoll, Uttar Pradesh Chief Minister Yogi Adityanath, in his election rallies, admitted that sugarcane was an issue of concern. He gave an assurance to the farmers that their dues will be cleared by the sugar mills. In Kairana constituency alone, six mills owed farmers more than Rs 800 crore cane dues ahead of the bypoll.
Sugar mills in UP are likely to end up crushing over 1,100 lakh tonnes (LT) of cane this season, as against 827.16 LT in 2016-17. It is estimated that the mills will produce over 120 LT of sugar this season. Currently, sugar mills in UP owe almost Rs 12,500 crore cane dues to farmers.
The issue of cane farmer dues is also hanging fire in Maharashtra, another BJP-ruled state. The move to announce a package appears to be an attempt to arrest the situation before it spins out of control in an election year. Industry watchers believe the worst is yet to come given the high acreage of crop planting this time. Arrears payable to sugarcane farmers by mills in the 2017-18 season has crossed Rs 23,000 crore across the country with UP accounting for almost a half.
Earlier, the government had taken steps like raising custom duty on import of sugar from 50% to 100%, removal of custom duty on export of sugar, imposition of reverse stock holding limits on sugar mills for February and March 2018, allocation of mill-wise Minimum Indicative Export Quota (MIEQ) of 20 LMT and financial assistance at the rate of Rs 5.50/quintal of cane crushed, totalling around Rs 1,500 crore.