Centre to buffer glut-hit sugar industry

NEW DELHI: In a bid to deplete the mammoth stocks with the sugar industry, the Centre is mulling a proposal to double the current buffer stock. The issue is listed for Cabinet attention on Thursday along with two others involving the sugar industry, including ocean freight and domestic transport subsidy to the industry for exports.

The third proposal, it is understood, involves per tonne incentive bonus directly to farmers who fall within cane regions of mills that have a consistently high recovery rate. This would be an incentive on the lines of that given to wheat farmers recently.

In turn, the buffer stock move is expected to allow sugar mills to borrow more from banks—they have been very reluctant lenders to the industry which is now in the throes of a glut, over the last few months — and clear this year’s mammoth cane arrears to farmers.

That is an issue very close to the heart of the political fraternity, all the more so in view of the impending elections in Uttar Pradesh, among key producers of sugarcane, in early April.

However, sources pointed out that WTO compatibility of both the export subsidy issue and the buffer stock issue could prove to be a speed breaker in Cabinet’s giving them a nod for now. Besides, the finance ministry is not happy, sources said, about forking out a whopping additional food subsidy of several hundred crores.

There is also a strong tussle within the government over the key subject of whether or not the sugar industry should be put firmly on the deregulation road soon. The export subsidies planned as well as upsizing the buffer stock would be counter to deregulation plans and, some experts feel, turn the clock back for the sugar industry quite disastrously.


Sections within the industry, however, have held the government squarely to blame for the crash in sugar prices and the big backlog on cane arrears payments, citing the “completely unreasonable” decision to ban all sugar exports between July 2006 and early this year, citing inflationary pressures caused by high domestic sugar prices. The ban came at a historic time when the industry had begun exporting, for the first time, at well above domestic prices. Prices have now come crashing down in the global market, however, making it uneconomical for the industry to export without any subsidy support from the government, even as it looks at another bumper crop in the next sugar year.