Sugar Industry Current Affairs

Rs. 8500 Crore Bailout Package for Sugar Industry Approved

The Union Cabinet chaired by Prime Minister has approved a Rs. 8500 Crore bailout package for the distressed sugar industry in the country.

Background

India is world’s second largest sugar producer after Brazil with production of around 20-25 million tonnes of sugar every year. The sugar production was 25.13 million tonnes in 2015-16 sugar season (sugar season ~ October to September); 20.2 million tonnes in 2016-17, 25 million tonnes in 2017-18 and is expected to be around 30 million tonnes in 2018-19. Currently, UP is India’s foremost sugar producing state and it is likely to maintain this position for the next two years. Maharashtra is on number 2 in production of both sugarcane as well as sugar.

The bumper harvest of sugarcane has created problem of plenty for already troubled cane farmers, sugar mills as well as governments at centre and state. The sugar mills need to buy cane from farmers at state advised price (SAP) but have to sell their produce at either marginal cost above production or in loss. Thus, higher price purchase of sugarcane but low price sale of sugar in open market creates stress on sugar mills and they are unable to make payments to farmers. This leads to accumulation of arrears.

Government Efforts

Though government decontrolled sugar industry partially in 2013 and allowed them to sell their produce in open market, the sugar industry faces a bizarre problem that price of its raw material (cane) is fixed by state and central governments as State Advised Price (SAP) and Fair and Remunerative Price (FRP) respectively. The government supported cane prices are attractive to farmers, but loss due to any fall in the prices of sugar in open market has to be borne by the sugar industry. Further, absence of infrastructure for ethanol production makes sure that the surplus production of sugarcane is not optimally absorbed.

Current Package

This package announced on June 6, 2018 includes Rs. 4500 crore soft loan for building ethanol production capacity and Rs. 1540-crore production-linked direct payments to cane farmers by sugar mills. Further, government has also hiked import duty on sugar to curb the problem of plenty. Government has also decided to create some kind of stock of sugar.

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CCEA approves financial assistance to sugar mills for clearing cane dues of farmers

The Cabinet Committee on Economic Affairs (CCEA) has approved proposal to provide financial assistance of Rs. 5.50 per quintal of cane crushed in sugar season 2017-18. It will help to sugar mills to offset the cost of cane which will inturn help sugar mills to clear cane dues of farmers.

Key Facts

The assistance will be paid directly to farmers on behalf of mills. It will be adjusted against cane price payable due to farmers against Fair and Remunerative Price (FRP) including arrears relating to previous years.  Moreover it will also credit subsequent balance if any into the mill’s account. Mills fulfilling eligibility conditions as decided by the Government will be given assistance.

Background

The sugar prices in domestic market have remained depressed since commencement of the season due to higher sugar production against estimated consumption during the current sugar season 2017-18. Due to depressed market sentiments and crash in sugar prices, liquidity position of sugar mills also have been adversely affected, leading to accumulation of cane price dues of farmers which have reached to more than Rs.19,000 crore. Government has taken various steps in recent times in order to stabilize sugar prices at reasonable level and to improve liquidity position of mills thereby enabling them to clear cane price dues of farmers.

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