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Shri Ram Vilas Paswan reviews sugar sector related issues with officials of DoFPD

The Union Minister for Food & Public Distribution and Consumer Affairs, Shri Ram Vilas Paswan held a review meeting with Secretary, Shri Sudhanshu Pandey and other senior officials of the Department of Food & Public Distribution here today. In the review meeting, issues like sugar production, outstanding payments arrears of sugarcane farmers, ethanol production and other related issues were discussed. Shri Paswan directed officials to issue necessary guidelines for timely payments of outstanding arrears of sugarcane farmers. The Minister was informed that this year sugar production is expected to reach 270 LT.

Measures taken by Government for current sugar season 2019-20:

The Government is reimbursing carrying cost of Rs.1674 crore towards maintenance of buffer stockof 40 LMT of sugar. Providing assistance @ Rs 10448/MT to sugar mills to meet expenses on export of 60 LMT of sugar with the likely expenditure of about Rs.6,268 crore.

Measures taken by Government for sugar season 2018-19:

Extending Assistance to sugar mills @Rs.13.88/quintal of cane crushed for sugar season 2018-19 to offset the cost of cane amounting to about Rs.3100 crore. Extending Assistance to sugar mills for defraying expenditure towards internal transport, freight, handling and other charges to facilitate export of sugar from the country in sugar season 2018-19 amounting to about Rs. 900 crores. Created buffer stock of 30 LMT of sugar for a period of one year from 1st July, 2018 to 30th June, 2019 for which Government is reimbursing carrying cost (which includes interest rate @ 12% maximum and storage charges /insurance premium @1.5%) of Rs.780 crore towards maintenance of buffer stock. Extended soft loans amounting to Rs 7,402 crore to sugar mills through banks, for which Government would bear interest subvention of about Rs 518 crore @ 7% for one year.

Effect of measures taken:

As a result of these measures, out of total cane dues of about Rs 86,723 Crore payable against the cane purchased by sugar mills during sugar season 2018-19, about Rs 85,956 crore have been paid to sugarcane farmers and only Rs 767 Crore for the sugar season 2018-19 are pending with the sugar mills on State Advised Price (SAP) basis.

In respect of current sugar season 2019-20, out of total cane dues of about Rs 66,934 crore on FRP basis, about Rs 49,251 crore have been paid to sugarcane farmers and only Rs. 17,683 crores are pending, as on 5.6.2020. On SAP basis, out of total cane dues of about Rs 72,065 crores, about Rs 49,986 crore have been paid to sugarcane farmers and only Rs. 22,079 crore are pending.

Thus, more than 69% cane dues have been cleared in respect of sugar season 2019-20. This season’s arrears are comparatively lower than last year’s arrears (of about Rs 28,000cr in May, 2019).

Liquidation of balance arrears in coming 4 months:

One of the reasons for building of arrears in the current season is the decrease in demand due to Covid-19 and nation-wide lockdown, which has reduced the consumption of sugar by around 10 LMT leading to lowering of revenue realisation of sugar mills. But, with the lifting of lockdown and opening of economy, the sale of sugar would normalize and in the balance 4 months of the current season i.e from June-September, 2020, sugar mills would be able to sell around 84 LMT of sugar in the domestic market. Secondly mills would be exporting about 10 LMT of sugar in coming 4 months. This would improve cash flows of sugar mills by more than Rs 30,000 crores.

Moreover, DFPD would be releasing assistance to the tune of Rs 1,100 Cr on account of export & buffer subsidy to sugar mills this month itself. This would facilitate sugar mills in clearance of their balance arrears.

Initiative of Government for diversion of excess sugar to ethanol and thereby improving their liquidity for clearance of cane price arrears of farmers:

As ethanol is a way forward for sugar sector, all sugar mills are being encouraged to divert excess sugarcane and sugar to fuel grade ethanol to achieve 10% blending target by year 2022. The Government has allowed production of ethanol from sugar and sugar syrup for current ethanol supply year 2019-20 (December, 2019 – November, 2020) and fixed the remunerative ex-mill price of ethanol derived from C-heavy molasses @ Rs. 43.75/litre, from B-heavy molasses @ Rs. 54.27/ litre and @ Rs. 59.48/litre for the ethanol derived from sugarcane juice/ sugar/ sugar syrup.

Soft loans of about Rs. 18,643 crores are being extended through banks to 362 sugar mills and molasses-based standalone distilleries for enhancement and augmentation of ethanol production capacity, for which an interest subvention of about Rs.4,045 crore for five years is being borne by the Government. So far, loans of about Rs 3,148 Cr have been sanctioned to 64 sugar mills and loans of about Rs 1,311 Cr have been disbursed to 38 sugar mills. Department of Financial Services is being requested from time to time to impress upon banks to expedite their loan applications.

Sugar mills having distillation capacity are also being encouraged to divert B-heavy molasses and sugar syrup for producing ethanol to utilize their capacity to maximum extent. Those sugar mills which do not have distillation capacity are being encouraged to produce B-Heavy molasses and to tie up with distilleries which can produce ethanol from B-Heavy molasses.

Stock Position for current sugar season 2019-20 (October-September):

Opening Stock (as on 01.10.2019): 145 LMT

Estimated Production during sugar season 2019-20: 270 LMT

Estimated domestic Consumption: 250 LMT

Estimated Export during Sugar Season 2019-20: 55 LMT (MAEQ)

Estimated closing stock as on 30.09.2020: 115 LMT

Closing Stock (as on 30.04.2020): 235 LMT

Position of Cane Price Arrears of farmers for season 2018-19 ( as on 5.06.2020):

(Rs in crore)

  FRP basis SAP basis
Cane dues payable 81,667 86,723
Cane dues paid 80,999 85,956
Cane arrears 668 767

Peak Arrears for season 2018-19 during last year i.e in May, 2019:

On FRP basis: Rs   25,434  crores

Arrears inclusive of SAP and FRP: Rs   28,222  crores

Position of Cane Arrears of farmers for current season 2019-20 (as on 5.06.2020):

(Rs in crore)

  FRP basis SAP basis
Cane dues payable 66,934 72,065
Cane dues paid 49,251 49,986
Cane arrears 17,683 22,079