Incentives given to sugar sector to facilitate payment of cane dues to farmers

New Delhi: The Central Government has given a number of incentives to sugar sector so far to facilitate payment of Cane dues to the farmers. These incentives are expected to improve the liquidity position of the industry reportedly stressed by sustained surpluses of production over domestic consumption during the last four years. These steps /measures include:-

 

• Scheme for extending financial assistance to sugar undertakings (SEFASU-2014):

The Government on 3.1.2014 notified the scheme (SEFASU -2014) envisaging interest free loans worth Rs. 6600 crores by bank as additional working capital to sugar mills, for clearance of cane price arrears of previous sugar seasons and timely settlement to cane price of current sugar season to sugarcane farmers.  Interest burden on this loan, estimated at Rs. 2750 crores over next five years would be borne by the Government through Sugar Development Fund

 

• Incentive for marketing and promotion of raw sugar production targeted for export:

The Government vide notification dated 28.02.2014 has announced incentive towards Marketing and Promotion Services of Raw Sugar Production linked to export of raw sugar during sugar season 2013-14. Till 31.03.2015, incentive of Rs. 183.87 Crores has been reimbursed during financial year 2014-15 to eligible sugar mills for the quantity of 7.015 Lac Metric Tons of raw sugar exported upto 30.09.2014.The Government has further extended the scheme for current sugar season 2014-15 and provided incentive @ Rs.4000/- per Metric Tons of raw sugar produced and exported upto 30.09.2015 subject to quantitative ceiling of 14.0 Lac Metric Tons.

 

• Ethanol Blending with Petrol (EBP) programme:

The Government has fixed remunerative prices for Ethanol supplied for blending with petrol.  It has dismantled the tender based price discovery procedures for ethanol and fixed attractive prices for ethanol supplied for petrol blending.  Remunerative ex-depot price of ethanol in the range of Rs.48.50 to Rs.49.50 per litre have been fixed.  As a result, the supply levels of ethanol, which were about 32 cr. Liters per year, have shot up to a level of 83 cr. Liters this year.  It has also been decided to waive the excise duties on ethanol for the ensuing sugar season 2015-16 to further incentivize ethanol supplies for the blending program.  This would further increase the ex-mill price of ethanol and help improve the liquidity of the industry and enable them to clear the cane price arrears.

Besides, the Government has scaled up blending target from 5% to 10% and has laid down the road map for Targeted Ethanol Blending Program based on a National Grid finalized in consultation with states which networks the distilleries to the OMC depots and details the quantities to be supplied.

•  Hike in import duty

With a view to improve the price sentiments of sugar, the government has also increased the duty on import of sugar from 25% to 40% and abolished the Duty Free import authorization Scheme (DFIA).  To prevent possible leakages of sugar in the domestic markets, the government has also reduced the export obligation period from 18 months to 6 months under the Advanced Authorization Scheme.

 

• Soft Loan scheme

The Central Government, with a view to facilitate payment of Cane dues of the farmers for the current sugar season 2014-15 has notified the scheme for extending soft loan to the sugar mills equivalent to the stock value of 25 lack M.T. @ Rs.24000 per M.T. Sugar mills who have cleared at least 50% of total cane price payable for the current sugar season 2014-15 calculated on the basis of FRP by 31.8.2015 will be eligible for the loan. The Government will bear interest burden up to 10% simple interest or actual rate of interest charged by the bank, whichever is less for maximum of one year by way of interest subvention. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.