Government may pay more to sugar cane farmers

New Delhi: The food ministry is working out a plan under which the government will pay a fixed amount to sugarcane farmers to be adjusted by mills against their payment obligation. As per an initial plan, the government proposes to pay farmers Rs 6.60 per quintal of sugarcane totaling an estimated Rs 1,800 crore, sources said. However, the PMO is believed to have asked the ministry to revise the plan as the subsidy amount seems high, the sources said.

After the government was criticised by the opposition in parliament for helping sugar mills even as farmers suffer, there is a realisation that all schemes should directly go to the beneficiaries, the sources said. The plan may be discussed at a meeting of cane commissioners slated for Friday where states will be asked to send their feedback, they said.

As mounting cane arrears did not fall and there was a growing resentment among farmers, government in June announced a Rs 6,000cr interest-free loan to mills with a condition that money will be credited to the bank accounts of farmers directly. There was also another condition that those mills will be eligible to get the soft loan who clear 50 per cent of their cane arrears as on June 10. Scheme seems to have worked after the government in Aug included those mills who had already paid more than 50 per cent prior to announcement of scheme as cane arrears have now reduced to about Rs 8,200cr as of Oct 7 from a level of Rs 21,000 cr in June, an official said.

The current proposal, if approved, will be the first one in the sugar sector when the sops will be directly given to farmers and not to the mills, the official said. The need for a financial package to farmers is to ensure that mills make the payment in time and the government does not have to face problems in the World Trade Organisation (WTO). Brazil and Australia moved WTO against India’s decision to pay export subsidy on raw sugar in 2014.

Uttar Pradesh is the second-biggest producer of sugar after Maharashtra and home to all big private mills such as Bajaj Hindusthan, Balrampur Chini Mills, Dhampur Sugar, Simbhaoli Sugar, Mawana Sugars, DCM Shriram. Even as the government has taken several steps to help the sector after Modi became the prime minister, the share prices of the big companies dropped by as much as 36 per cent since May 26.

The government also recently asked mills to export four million tonnes of sugar in the season that started on October 1 as India is saddled with a huge stockpile of 9.6 million tonnes of the sweetener at the beginning of the year. The food ministry allocated factory-wise quota for exports and advised them to do it sooner so that domestic market prices go up. Sugar mills have been demanding government intervention as they claim their selling price has been Rs 4-5 a kg below production cost.

India, the world’s largest consumer and second-biggest producer of sugar, is estimated to make 27 million tonnes of sugar this season, according to Indian Sugar Mills Association (ISMA). Output in Uttar Pradesh, the second largest producer, is seen at 7.5 million tonnes and in Maharashtra 9 million tonnes, ISMA said last month. However, the Uttar Pradesh government has estimated its output for this year at 7.2 million tonnes and cooperative federation in Maharashtra expect a production of 8.5 million tonnes.

As global prices of sugar have started rising of late, the government may have to revise its plan if there is a delay in taking a decision. The Food and Agriculture Organisation’s index of 73 food prices rose 0.8 per cent to 156.3 in September for the first time since October 2014, mainly on rebound in dairy and sugar rates.