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Cabinet approves interventions to resolve sugar sector crisis

New Delhi [India] Jun 6:
To improve the problem of liquidity of sugar mills resulting in accumulation of huge cane price arrears of farmers, the Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday approved measures involving a total amount of about Rs. 7000 crore.

A buffer stock of 30 LMT of sugar for one year and to incur an estimated expenditure of Rs.1175 crore for this purpose has been created. However, based on the market price and availability of sugar, this may be reviewed by Department of Food and Public Distribution (DFPD) any time.

The reimbursement under the scheme would be made on a quarterly basis which would be directly credited to the farmers' account on behalf of mills against their cane price dues.

Another measure was to notify Sugar Price (Control) Order, 2018 under Essential Commodities Act, 1955 to fix minimum selling price of refined sugar at the mill gate below which no white sugar can be sold and delivered by a sugar mill in the domestic market.

Fixation of a minimum selling price of white sugar would be based on Fair Remunerative Price (FRP) of cane and minimum conversion cost of refined sugar. The minimum selling price of refined sugar shall be initially fixed at Rs.29 per kg which can be revised by DFPD subsequently based on the revision of FRP etc.

This will not affect the availability of sugar to consumers at a reasonable price and the Government will put in place a mechanism to ensure that the retail prices of sugar are kept fully under control.
At present, this would be done along with the imposition of stock holding limits on sugar mills. The stock limit on mills will be initially imposed for the current sugar season which may be reviewed by DFPD at any time.

To augment the capacity through up-gradation of existing distilleries attached to sugar mills by installing incineration boilers and setting up new distilleries in sugar mills; the government will bear interest subvention of maximum Rs.1332 crore over a period of five years including moratorium period of one year on estimated bank loan amounting to Rs.4440 crore. This would help diversion of sugar during surplus phase to reduce excess inventories.

Excess production during the current sugar season and indication of higher production in the ensuing season has been continuously depressing the market price of sugar.

Due to the depressed market sentiments and crash in sugar prices, the liquidity position of the sugar mills has been adversely affected leading to accumulation of cane price dues which has already reached to an alarming level of more than Rs.22000 crore.

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