4 mt sugar buffer gets nod; floor price stays same amid growing arrears

Topics Sugarcane

With sugarcane payment arrears to growers at a little over Rs 15,000 crore, the Cabinet Committee on Economic Affairs approved the creation of a buffer stock of four million tonnes (mt). 

It also kept its Fair and Remunerative Price (FRP, the floor price it sets; states may set it higher) of cane unchanged for the 2019-20 season at Rs 275 a quintal, for 10 per cent recovery. The sugar year officially begins on October 1. 

As in 2018-19, the FRP will attract a premium of Rs 2.75 a quintal for every 0.1 per cent increase in recovery over 10 per cent (which is the amount of sugar derived from cane). This is aimed to prod sowing of superior quality cane and incentivise mills into higher recovery. In 2017-18, almost 55 per cent of the mills that operated got a recovery rate of over 10 per cent. In the 2018-19 season as well, the Centre approved creation of a buffer stock, of three mt. This expired at end-June. The new buffer will cost the exchequer Rs 1,674 crore and will be in operation from August 1. The cost will be on account of the interest on loans taken by sugar mills from banks against the buffer stock and the insurance on it. The interest burden is borne by the government but with a condition that mills have to guarantee that the loans they take against the buffer be used solely for clearing cane dues.

Both decisions are expected to improve the liquidity position of mills and enable quicker clearing of cane dues. To what extent remains to be seen, as the buffer will absorb only a portion of the 14.5 mt of opening stock the sugar industry will have at the start of the 2019-20 season. The normal stock requirement at the start of any season is 4.5-5 mt. 

Prominent farmers' groups criticised the decision not to hike the FRP of sugarcane for 2019-20 season. Rakesh Tikait, of Bhartiya Kisan Union, said the decision will hit farmers as input costs have gone up by 15 per cent in the last one year. 

“The FRP has hiked quite steeply in the past few years and sugarcane has outstripped the return to farmers from other crops. This decision will restore some balance amongst the crops,” stated Abinash Verma, director-general of the Indian Sugar Mills Association. 

The country’s sugar output is likely to be 32.95 mt in the current 2018-19 marketing year (October-September), as against annual domestic demand of around 26 mt.

Other decisions

  • The Cabinet approved changes to the Aadhaar and Other Laws (Amendment) Bill, 2019
  • Sale of 481.79 acres held by the Fertilizers and Chemicals Travancore (FACT) to the Kerala government approved 
  • Nod to merger of National Institute of Miners' Health with the National Institute of Occupational Health, Ahmedabad

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