In a farmer-friendly move, the Bharatiya Janata Party (BJP) government on Wednesday announced a Rs 8500-crore bailout package for the sugar industry, helping cash-starved mills to clear cane dues of over Rs 22,000 crore.
Besides that, the cabinet, led by Prime Minister Narendra Modi, has also approved a soft loan of Rs 4400 crore for enhancing ethanol production capacity to absorb the cane and a three million tonne buffer stock to balance the ongoing demand and supply mismatch.
Announcing the Cabinet decision, Food Minister Ram Vilas Paswan said the government has decided to create a buffer stock of 3 million tonnes for one year, which will result in a Rs 1,175 crore burden on the Centre in form of storage cost to mills.
The bailout package was proposed after sugar mills started incurring losses due to a sharp price fall following a record sugar production of 31.5 million tonnes in the 2017-18 marketing season (October to September).
The cabinet announced the much-needed package days after the BJP lost Lok Sabha bypoll of Kairana constituency in Uttar Pradesh, the country's largest sugar producing state.
The bailout package, however, will not affect the availability and prices of sugar for consumers. The government has also assured all the necessary steps to control the retail prices of sugar.
Moreover, the Centre had last month announced production-linked subsidy of Rs 1,540 crore for sugarcane farmers, taking the total package to about Rs 8,500 crore.
Earlier this year, the NDA government had doubled sugar import duty to 100 per cent and scrapped export duty to check sliding domestic prices. It has also asked mills to export 2 million tonnes of sugar.
India is the world's second-largest producer of sugar after Brazil.
(With inputs from agencies)