Sugar mills' cane arrears to fall Rs 1,100 crore on govt subsidy

New Delhi: Sugar industry body ISMA on Wednesday said the millers' cane price liability to farmers would reduce by about Rs 1,100 crore following the government's decision to give direct subsidy of Rs 4.5 per quintal to cane growers.

The Indian Sugar Mills Association (ISMA), however, said the cash-starved industry might need further assistance as losses are expected to be higher due to low prices of sugar.

The Cabinet Committee on Economic Affairs today approved a proposal to pay a production-linked subsidy of Rs 4.50 per quintal directly to cane farmers in the 2015-16 season to help cash-starved sugar mills clear arrears -- a move that would cost the exchequer about Rs 1,147 crore.

"The sugar industry welcomes Government's decision to give Rs 4.50 per quintal of sugarcane crushed in 2015-16 sugar season (October-September). As per estimated cane crushing during 2015-16 sugar season, it will work out to around Rs 1,100 crore," ISMA Director General Abinash Verma said in a statement.

"It will reduce industry's liabilities towards cane to that extent, reducing a part of its losses," he added.

Sugar Mills owe about Rs 6,500 crore to sugarcane farmers.

Terming the decision as significant, he said this means that the government is no longer shying away from owning up the FRP it fixes for sugarcane, by directly contributing for a part of the cane price, instead of continuously burdening the millers".

The Centre fixes FRP (Fair and Remunerative Price) which is the minimum price to be paid by the millers to sugarcane farmers.

"This concept of the government to bridge the gap, at least partially, between what the sugar mills cane pay to farmers as per their revenue realization, and what the Government wants to give to farmers, will help to reduce cane price arrears," Verma said.

ISMA DG said that the losses will be more than Rs 1,100 crore at current low sugar prices.

"Therefore, if sugar prices do not improve to cover costs during the season, the industry and farmers may seek further help from the government's budget," Verma said.