With record sugar production continuing to drive down prices even as cane farmers face huge arrears in payment, the Centre has decided to offer a ₹10.45 per kg subsidy to incentivise mills to export their surplus stocks. The export subsidy package will cost the exchequer ₹6,268 crore, according to an official statement.
The decision was taken at a meeting of the Cabinet Committee on Economic Affairs on Wednesday.
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The subsidy package will facilitate the export of up to 60 lakh tonnes in the 2019-20 marketing season, which begins in October. It will benefit millions of farmers in U.P., Maharashtra and Karnataka, as well as other states, Information and Broadcasting Minister Prakash Javadekar told journalists after the Cabinet meeting.
A month ago, the Food Ministry told the Lok Sabha that sugar mills across the country owed cane farmers a total of ₹17,518 crore, of which ₹9,935 crore was due to U.P. farmers alone.
However, surplus stocks and crashing prices left mills with a liquidity crisis. The 2019-20 marketing season is expected to start with an opening stock of 142 lakh tonnes, and end with a closing stock of 162 lakh tonnes.
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This surplus will only be partially mitigated by previously announced government measures to create a buffer stock and incentivise diversion of cane for the production of ethanol. Global sugar prices are more than ₹10/kg lower than domestic prices. Hence, the government subsidy to sweeten the deal and persuade mills to export their surplus.The lump sum export subsidy will be provided for expenses on marketing costs including handling, upgrading and other processing costs, costs of international and internal transport and freight charges, the statement said. adding that the subsidy was in conformity with WTO agreements.
“The subsidy would be directly credited into farmers’ account on behalf of mills against cane price dues and subsequent balance, if any, would be credited to mills’ account,” the statement said.