Rs 8,500 crore bailout for sugarcane farmers

New Delhi: After the BJP’s defeat in recent bypolls, particularly in the sugar belt of Kairana in Uttar Pradesh, the Centre on Wednesday doled out a sweet deal for sugarcane farmers. With reports that sugarcane farmers are up in arms against the Centre, the Cabinet on Wednesday came out with a bailout package of Rs 8,500 crore to boost farmers’ incomes by creating a buffer stock for sugar, enhancing ethanol production capacity and fixing a minimum selling price to cut mill losses.

The Cabinet, at a meeting chaired by Prime Minister Narendra Modi, approved Rs 4,440 crore in soft loans for building ethanol production capacity to absorb the cane and a buffer stock of three million tonnes, besides for the first time fixing Rs 29 per kg as the minimum price below which mills cannot sell sweeteners. These decisions are aimed at helping mills to clear part of the arrears of over Rs 22,000-crore to cane farmers.

The maximum cane dues of over Rs 12,000 crore are in Uttar Pradesh, the nation’s biggest sugarcane-producing state. With 80 Lok Sabha seats, this package is seen as an attempt by the government to woo sugarcane farmers ahead of the 2019 general election. The BJP’s manifesto for the 2017 Assembly polls had promised payment to farmers within 14 days of selling sugarcane to the mills. The bailout package is important as the Lok Sabha polls are less than an year away and the party wants to retain the maximum number of seats from the state. The BJP and its allies got 73 seats in UP in the 2014 elections.

The move comes days after the BJP received a crushing defeat at the hands of a united Opposition candidate from RLD Tabassum Hasan in Kairana.

Food minister Ram Vilas Paswan said the government has decided to create a buffer stock of three million tonnes for one year, which will result in a Rs 1,175-crore burden on the Centre in form of storage cost. The carrying cost will be paid on a quarterly basis, which will be directly credited into farmers’ account on behalf of mills against their cane dues.

The creation of a buffer stock would help soak up excess supplies and boost sliding domestic prices. “The mills are selling sugar at Rs 26-28 per kg as against the average production cost of Rs 32 per kg,” Mr Paswan said, adding that exports are also not viable as global prices are lower than the rates prevailing in India. On soft loans to mills for ethanol, the minister said the government will bear the interest subvention of Rs 1,332 crores over a period of five years, including the moratorium period of one year.

The minister said the MSP of white/refined sugar had been fixed at Rs 29 per kg.  The government notified the Sugar Price (Control) Order 2018 under the Essential Commodities Act 1955 to fix the minimum selling price.

“This will not affect availability of sugar to consumers at a reasonable price and the government will put in place a mechanism to ensure that retail prices of sugar are kept fully under control,” an official statement said. This will be done along with the imposition of stockholding limits on sugar mills. The stock limit on mills will be initially imposed for the current sugar season (upto September 2018), it added.

Earlier this year, the Centre doubled the import duty on sugar to 100 per cent and scrapped export duty to check sliding domestic prices. It also asked the mills to export two  million tonnes of sugar. India is the world’s second largest producer of sugar, after Brazil.