Govt approves creation of 4 mn tonnes of sugar buffer stock during FY20

Representative Image
The government on Wednesday approved creation of a sugar buffer stock of 4 million tonnes in view of bumper domestic production and pending sugarcane arrears of more than Rs 15,000 crore.

The government will spend an estimated Rs 1,674 crore for this purpose. The buffer stock will help maintain demand-supply balance and to stabilise sugar prices, an official release said.

The Food Ministry's proposal in this regard was approved in the meeting of the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi.

In August 2018, the Centre had created a buffer stock of 3 million tonnes of sugar, costing Rs 1,175 crore to the exchequer, to improve the liquidity position of the sugar mills, enabling them to clear cane price arrears of farmers and stabilise domestic sugar price.

"To protect the interest of sugarcane farmers and ensure dues are paid on time, the government has decided to create a buffer stock of 4 million tonnes of sugar, one million tonnes higher than the last year," Information and Broadcasting Minister Prakash Javadekar told reporters briefing about the cabinet decisions.

Since the 2019-20 marketing year is likely to commence with huge carryover/opening stock, building a sugar buffer stock will help maintain demand-supply balance and to stabilize sugar prices, an official statement said.

The buffer stock will be created for one year from August 1, 2019, to July 31, 2020, for which the government would be reimbursing the carrying cost of about Rs 1,674 crore to participating sugar mills, it said.

"This would improve the liquidity position of sugar mills. The reimbursement available under the scheme would be directly credited into farmers' account on behalf of sugar mills against their cane price dues," the government added.

Welcoming the decision, industry body ISMA Director General Avinash Verma said it will help reduce a substantial part of the burden of sugar mills.

"Not only will it give extra cash flows to sugar mills, but will also hugely improve market sentiments, because creation of buffer stock immediately withdraws 4 million tonnes of sugar from the market for the next 12 months," he said.

India's sugar output is likely to be 32.95 million tonne in the current 2018-19 marketing year (October-September), as against the annual domestic demand of 26 million tonnes.

According to ISMA, opening stocks of sugar are expected to be at an all-time high of around 14.5 million tonnes on October 1, 2019, as against the normative requirement of around 5 million tonnes.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel