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Our Bureau

Bailout package aims to tide over sugar glut, arrears

New Delhi March 25 Ahead of crucial elections to the Uttar Pradesh (UP) Assembly, the Centre has approved the creation of a 20-lakh tonne (lt) sugar buffer, besides providing export incentives of Rs 1,350 to Rs 1,450 per tonne to mills.

The bailout package — aimed at tiding over the present sugar glut and piling up of payment arrears to cane farmers, especially in UP — was reportedly cleared by the Cabinet Committee on Economic Affairs (CCEA) at a late evening meeting on Saturday. No official confirmation for the decision though was available, with the Food Ministry expected to issue a statement only on Monday.

Buffer

The 20-lt buffer would be maintained by the factories themselves, even though it is the Centre that will defray the cost of interest, storage and insurance payable on this sequestered sugar. The total buffer quantity will be allocated among mills on a pro-rata basis, linked to the stocks individually held by them.

The annual outgo from the exchequer on the 20-lt buffer is expected at around Rs 400 crore, depending on how the stock pledged with banks is valued (at three months average or prevailing ex-factory price, whichever is lower) and interest payable on it.

Reimbursement support

The CCEA is learnt to have also cleared payment of the export incentive of Rs 1,350 per tonne to sugar mills in the coastal areas (Maharashtra, Tamil Nadu, Karnataka, Gujarat) and Rs 1,450 per tonne for factories in UP and other northern States. These flat payments — compatible with the World Trade Organisation (WTO) rules — will partly reimburse expenses on internal transport, port handling and ocean freight.

The Food Ministry had further recommended an additional Rs 440 per tonne support for raw sugar exports, though it is not clear whether this, too, has been approved. Given that the market for white sugar is not as promising as raw sugar — particularly with huge refining capacities coming up in neighbouring countries such as Bangladesh (15 lt), Indonesia (12 lt), Dubai (15 lt), Saudi Arabia (10 lt) and Egypt (7.50 lt) — a case has been made for giving extra incentive to raw sugar exports.

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More Stories on : Sugar | Agricultural Policy | Exports & Imports

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