Govt unveils sops for cash-starved sugar sector
New Delhi, June 23
To discourage imports, the new government also announced an increase in the import duty on sugar from the existing 15% to 40%. Though there are apprehensions that the move may see an increase in sugar prices by Rs 2 to 3, the industry representatives say given the excess production and losses suffered by mills due to difference between cost of production and ex-mill prices (Rs 4 in UP and Rs 1.5 in western and southern regions), the move was necessary.
Mills are facing a cash crunch as domestic prices have slipped below the cost of production, thus negatively impacting profits. Industry fears that domestic prices of the commodity could fall further if cheaper imports are not curbed.
Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore being in UP — a state which is fixing higher prices due to political reasons thus “putting burden on millers”. Food Minister Ramvilas Paswan, while announcing the key decisions taken at a high-level inter-ministerial meeting today, called for “a holistic view on pricing”.
Paswan said that efforts would also be made toincrease ethanol blending with petrol to 10%. Currently, ethanol blending is less than 2%. However, sources say the government is making plans to make ethanol blending mandatory for petroleum companies.
The decisions follow the directions of the Prime Minister. Principal Secretary to the PM Nripendra Misra and Cabinet Secretary Ajit Seth were present at the meeting.
The minister said the four key decisions included extension of interest-free loan given against excise duty paid by sugar mills for five years instead of three years. Paswan said the department was yet to calculate the exact interest-free loans to be provided to the industry.
In December, the UPA government had approved Rs 6,600 crore interest-free loans for the sugar industry for clearing growers’ dues. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.
According to the minister, the decisions will be announced subject to the condition that mills give guarantee that they will clear Rs 11,000 crore sugarcane arrears at the earliest. “We don't have any problems to announce these incentives formally if millers are ready to make payments. If they give assurance today, we will announce incentives today itself,” he said.
Some of the decisions will be notified by ministries concerned, while some require the Cabinet nod, he added. The sugar industry welcomed the announcements, assuring that it would clear the arrears as fast as possible.
Abinash Verma, DG, Indian Sugar Mills Association said the “key decisions would benefit the industry and improve the liquidity of the sugar mills, which would help the industry to clear the pending payments to cane growers at the earliest. The 10% ethanol blending would save forex of $1.6bn to $1.7 bn, which is a huge plus for the country as it would improve the revenue deficits.
“Also there is a need to improve the sugar prices to allow mills to at least cover their cost of producing sugar. A 40% duty on sugar import would ensure that no sugar from other nations makes its way into the Indian markets, as we already have about 20-25 lakh tons of surplus sugar with us. This would definitely improve the market sentiments, domestic sugar prices, and better buying by the traders and wholesalers,” he said.
Prices may go up
* The Centre has announced an additional interest-free loan of up to ~4,400 crore for mills to pay arrears to cane growers *
The government has also hiked the import duty on sugar from the existing 15% to 40%. The move may raise the sugar prices by
* The Centre has announced an additional interest-free loan of up to ~4,400 crore for mills to pay arrears to cane growers
* The government has also hiked the import duty on sugar from the existing 15% to 40%. The move may raise the sugar prices by Rs 2-3.