Government to pay cane growers on behalf of sugar mills

Concerned over rising farmer discontent over lower payments and the build-up of sugarcane arrears, the Centre on Wednesday approved a new financial assistance scheme for sugar mills that will help them clear dues at the earliest.

Sugarcane dues have crossed Rs 19,000 crore and the government fears that this could lead to a wider discontent among farmers and turn politically suicidal ahead of 2019 elections in states like Uttar Pradesh and Maharashtra.

As per the new scheme approved by the cabinet committee on economic affairs (CCEA), sugar mills will be given financial assistance at Rs 5.50 per quintal of cane crushed in sugar season 2017-18 (October-September). This will offset the cost of cane and help mills clear dues of farmers, said a government statement.

The genesis of problem for rising arrears lies in arbitrary cane-pricing mechanisms followed by states. The Centre has also not been able to rein in sugarcane growing states to check the practice. This has created inconsistencies in pricing and affected both the farmers and sugar mills.

Also, higher sugar production against the estimated consumption during the SS18 have depressed domestic sugar prices and adversely affected liquidity position of sugar mills, leading to accumulation of cane price dues of farmers.
The CCEA approved plan includes payment of financial assistance directly to farmers on behalf of mills. The payment will be adjusted against cane price payable due to farmers against fair and remunerative price (FRP) including arrears for previous years. Subsequent balance if any, will be credited into the mill’s account.

It has been decided to provide assistance to mills, which fulfil the eligibility conditions as decided by the government.

Apart from the new scheme, the government has also increased customs duty on import of sugar from 50 per cent to 100 per cent to prevent dumping of the commodity. It has also imposed reverse stock holding limits on producers of sugar for February and March, while customs duty has been waived on export to encourage the sugar industry to start exploring global market.

Sugar production is expected to cross 29.5 million tonnes achieved in 2017-18. In the absence of a big pickup in demand, higher production has depressed sugar prices.

India is the world’s second largest sugar producer having a surplus production as the domestic demand is pegged at 24-25 million tonnes annually.