New Delhi: With mounting cane dues, which is a major poll plank for the Centre ahead of the 2019 elections, the government is likely to announce a bailout package of over Rs 7,000 crore to cover some of the Rs 22,000 crore arrears.
The damage control measure may provide some relief to cash-starved mills to clear dues to farmers at the earliest. A decision in this regard is expected to be taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA) scheduled on Tuesday.
Last month, the government had announced a Rs 1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments.Sugar mills are unable to make payments to cane growers as their financial health has worsened due to a sharp fall in sugar prices after a record production of 31.6 million tonne (MT) so far in the 2017-18 season (October-September).
Maximum cane dues of more than Rs 12,000 crore are in Uttar Pradesh alone, the country's biggest sugarcane producing state.
Cane arrears was seen as a major issue that led to the BJP's loss in the recently held bypolls in Kairana, Uttar Pradesh.
The party, which held the Lok Sabha seat, lost it to Ajit Singh's Rashtriya Lok Dal, which was backed by the Congress, Samajwadi Party and Dalit powerhouse Mayawati.
According to sources, the government has worked out a slew of measures to ensure farmers' dues are cleared by mills. "A bailout package of Rs 7,000 crore has been proposed," they added.
The Food Ministry has proposed creation of a buffer stock of 3 million tonnes of sugar. The carrying cost of the sweetener would be borne by the government which is estimated to cost the exchequer around Rs 1,300 crore, they said.
Besides setting up of the buffer stock, the food ministry has proposed fixing minimum ex-mill sale price at around Rs 30 per kg, reintroducing the monthly release mechanism and imposing stock limits on mills by fixing quota for each mill.
To help beleaguered sugar industry, the petroleum ministry has proposed interest subsidy of 6 per cent on Rs 4,500 crore to sugar mills for expansion and creation of new capacity of ethanol. The scheme provides five years’ time to mills for repayment of loans and a moratorium on repayment in the first year.
The interest subsidy itself would cost Rs 1,200 crore to the government, the source added.
The petroleum ministry is also looking at raising ethanol price so that mills make payment to farmers at the earliest.
Presently, the average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg, which is below the cost of production.
The Centre has already doubled sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.
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