NEW DELHI: Fresh from the bypoll debacle, the government finally decided to take the bitter pill by approving Rs 8,500 crore bailout package for disgruntled sugar industry, as sugar prices became one of the most important poll issues, especially in the sugar belt.
The Cabinet, headed by the Prime Minister, approved the bailout package which will include soft loan worth Rs 4,500 crores for building ethanol production capacity and Rs 1,175 crore for creating warehouse for sugar industry to keep excessive stock.
The relief package will also include Rs 154 crore production-linked direct payment plan announced earlier which will be used to clear pending dues of cane farmers.
After posting a record sugar production of over 31.6 million tonnes, there was a sharp decline in sugar prices which dropped to its lowest in last 28 months. Currently the average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg, below cost of production, resulting in huge financial loss for sugar mills. As sugar prices crash, factories have not been able to pay farmers their dues. In Kairana constituency alone, in the western Uttar Pradesh, farmers claimed dues worth Rs 800 crore were pending ahead of the bypoll. Even in Maharashtra, dues worth Rs 2,000 crore were pending.
Sugarcane price was an important poll issues in bypolls especially in Noorpur and Kairana in western Uttar Pradesh where the ruling BJP lost both seats. Now, with an eye on the 2019 general elections, the relief package aims to regain the confidence of sugarcane farmers and mill owners in Western Maharashtra and Western UP which forms a large voter bank.
Earlier the Centre had doubled import duty on sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. The government also asked mills to export 2 million tonnes of sugar.
Ready to take bitter pill
➊ Government will extend of a minimum price of K29 per kilogram of sugar
➋Out of total package, K1,175 crore will be for warehouses to store sugar
➌Soft five years loan of K4,500 crore to promote ethanol production, no repayment in first year
➍The Centre will suffer a burden of K1,332 crore
➎It also includes previously announced K154 crore production-linked direct payment to cane farmers