Govt may announce package of almost Rs 80 bn to bail out sugar sector

Govt may announce package of almost Rs 80 bn to bail out sugar sector

New Delhi, Jun 5: Days after the ruling BJP suffered an electoral setback, primarily in the sugarcane-growing belt of western Uttar Pradesh, and with farmers in parts of the country stopping supplies of essential commodities to protect price fall, the Centre is expected to announce a fresh package of almost Rs 80 billion to bail out the sugar sector.
This will be in addition to the financial assistance of Rs 5.50 per quintal of sugarcane announced a few weeks ago, costing over Rs 15 billion.
Officials said the government is likely to take a formal decision on the sugar package at a Cabinet meeting this week. And could include creating a 3 million-tonne buffer stock of sugar with an expenditure of Rs 12 billion and also a scheme to boost the ethanol production capacity of sugar mills.
This ethanol production scheme is expected to cost the exchequer around Rs 44 billion and could entail an interest subsidy of 6 per cent to sugar mills for expansion and creating capacity for ethanol.
The scheme, sources said, also provides five years to mills for repaying loans and a moratorium on repayment in the first year.
The petroleum ministry is looking at raising the ethanol price from the existing Rs 40.85 per litre by another Rs 6-7 a litre so that mills can makes payment to farmers at the earliest.
“These steps, if approved, are moves in the right direction though they have come slightly late, but nonetheless would help in improving the liquidity position of sugar mills,” Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories (NFCSF), said.
He said improvement in ex-mill prices of sugar would not only help mills clear their cane arrears, but also help them in improving their working capital needs to start operations next year.
Sugarcane arrears have risen to over Rs 220 billion owing to a sharp drop in ex-mill prices on account of the bumper harvest.