NEW DELHI, June 5: Concerned over mounting cane arrears to the tune of Rs. 22,000 crore, the government is expected to announce a bailout package of over Rs. 7,000 crore to clear dues of farmers.
A decision in this regard is expected to be taken in the meeting of the Cabinet Committee on Economic Affairs (CCEA) scheduled today, the sources added.
Last month, the government had announced a Rs 1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments.
The amount will include creation of buffer stock of 30 LMT (lakh metric tonne), for which the money will be transferred directly to farmers' bank accounts. The minimum price for sale of sugar will be fixed at around Rs.30 a kg. The package is also expected to include a scheme worth over Rs. 4,400 crore for increasing the capacity for production of ethanol, one of the by-products of sugarcane.
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).
To help a beleaguered sugar industry, the petroleum ministry has proposed interest subsidy of 6 percent 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.
Cane arrears is seen as the central issue that led to the BJP's loss in the recently concluded crucial by-elections in Kairana, Uttar Pradesh - the largest cane producing state in the country. The issue had become campaign fodder during the recently concluded bypoll. The Lok Sabha constituency alone has six mills where owners owe the farmers an estimated Rs. 800 crores worth of dues.
The state's BJP government led by Yogi Adityanath said it was committed to paying cane dues within two weeks of purchase by the state's sugar mills. But ahead of the elections, many sugar mills put up closure notices. The mill association said the bumper crop was steadily eating into their profit margins.
Maximum cane dues of more than Rs. 12,000 crore are in Uttar Pradesh. India, the second largest producer of sugar after Brazil is home to nearly 50 million cane farmers, mostly in UP, Maharashtra and Karnataka. Further, about 500,000 workers are directly employed by sugar mills.
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