The government has approved a subsidy of ₹5.5 per quintal of sugarcane crushed in the 2017-18 season to help sugar mills clear more than ₹19,000 crore in dues to cane farmers.
The decision was taken by the Cabinet Committee on Economic Affairs on Wednesday, an official statement said. The assistance will be paid directly to the farmers on behalf of the mills. It will be adjusted against the Fair and Remunerative Price (FRP) of ₹255 per quintal set by government as the rate that mills must pay to cane farmers, as well as the arrears of payments pending from previous years.
Any subsequent balance will be credited into the mill’s account, the statement said, adding that assistance will be provided to those mills which fulfil the government’s eligibility conditions.
The subsidy will work out to ₹1,550 to ₹1,600 crore for the current season, said Abinash Verma, director general of industry body Indian Sugar Mills Association (ISMA). He welcomed the decision, but added that “this can be taken as a first step towards various other initiatives and financial assistance that the Government has to take very soon” to help the mills and the farmers.
Sugar production has hit record highs this year, crossing domestic consumption prices, and leading to a crash in prices. Industry lobbyist Indian Sugar Mills Association (ISMA) estimates that wholesale sugar prices have fallen by ₹9 per kg over the past five months, and the mills are now incurring a loss of ₹8 per kg of sugar.
A production subsidy was among the suggestions recommended by a Group of Ministers which met last week. They also recommended a sugar cess and a reduction in the Goods and Services Tax (GST) on ethanol.
Over the past three months, the government, in an effort to stabilise prices and improve the liquidity position of mills, has already doubled customs duty on sugar imports, withdrawn customs duty on sugar exports and imposed reverse stock holding limits on sugar producers for February and March, the official statement said.
