According to farmers’ estimates, nearly Rs 22,000 crore of cane payments are still due to them but cash-starved mills have been unable to meet requirements.
The Rs 8,000-crore package will include provisions for the creation of a sugar buffer stock of 3 million tonnes, interest subsidy on Rs 4,500 crore loan to mills for expansion and creation of new ethanol capacity among others.
A bailout package has been worked out days after the BJP lost Lok Sabha by-poll in Kairana constituency in Uttar Pradesh, the country’s largest sugarcane producing state.
The current crisis in the sugar sector is primarily due to a substantial glut in the domestic market, which in turn has brought mill prices of sugar below the cost of production resulting in massive losses. Currently, the average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg.
The current package will be in addition to the measure the government had already taken, like doubling the import duty for sugar to 100% and removed export duties. It has also asked mills to export 2 million tonnes of sugar.
Last month, the government had announced a Rs 1,500 crore production-linked subsidy for sugarcane farmers to help millers pay cane payments.
The Centre has already doubled sugar import duty to 100% and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.