The Union Cabinet is likely to consider Wednesday a Rs 4,500 crore plan to more than double the production assistance paid to sugarcane farmers and transport subsidy to mills exporting the sweetener, sources said.
The proposal to raise production assistance to Rs 13.88 per quintal to farmers and transport subsidy to mills for exports of five million tonnes of surplus sweetener is part of government plan to clear more than Rs 13,500 crore arrears sugar mills have towards farmers.
In June, the government had announced Rs 8,500 crore package for the cash-starved industry, which is facing a glut-like situation because of record 32 million tonnes of sugar production in the current 2017-18 marketing year ending this month.
Sugar output is set to increase further to 35 million tonnes in the next marketing year as against the domestic demand of 26 million tonnes. The opening stock of sugar is estimated at 10 million tonnes on October 1, next month.
According to sources, the Cabinet Committee on Economic Affairs (CCEA) will take up the food ministry's proposal Wednesday under which production subsidy to farmers has been increased to 13.88 per quintal for 2018-19 from Rs 5.5 in the current marketing year.
Moreover, the ministry has proposed a mandatory export of 5 million tonnes of sugar and offered a subsidy of up to Rs 3,000 per quintal for transport and handling as global prices are unviable for shipments. This subsidy will be based on the distance of mills from ports.
Sources said the government will have to bear about Rs 4,500 crore on account of these measures to help sugar mills and cane farmers. These steps will enable mills to export sugar and clear cane arrears, which currently stand at Rs 13,567 crore. Mills in Uttar Pradesh owes the maximum at Rs 9,817 crore to cane farmers, they added.
The government has taken a slew of measures to bail out cash-starved sugar mills as well as cane farmers in the last one year.
First, it doubled the import duty on sugar to 100 per cent and then scrapped the export duty on it. It also made it compulsory for millers to export two million tonnes of sugar even as the global prices were low.
With mounting cane arrears, the government in June announced Rs 8,500 crore package for the industry and creation of buffer stock. The package included soft loans of Rs 4,440 crore to mills for creating ethanol capacity. It will bear an interest subvention of Rs 1,332 crore for this.
The Centre had also announced an assistance of Rs 5.50 per quintal of cane crushed, amounting to Rs 1,540 crore, to mills. Around Rs 1,200 crore was allocated for the creation of 3 million tonnes buffer stock of sugar.The minimum selling price of the sweetener has been fixed at Rs 29 per kg.
Last week, the government approved an over 25 per cent hike in the price of ethanol produced directly from sugarcane juice for blending in petrol in a bid to cut surplus sugar production and reduce oil imports.The CCEA raised the procurement price of ethanol derived from 100 per cent sugarcane juice to Rs 59.13 per litre from the current rate of Rs 47.13.
The price for ethanol produced from B-heavy molasses (also called as intermediary molasses) was hiked to Rs 52.43 a litre from the current Rs 47.13 but that for ethanol produced from C-heavy molasses was reduced marginally to Rs 43.46 from Rs 43.70.