Besides setting up of buffer stock, the food ministry in the draft cabinet note has proposed fixing minimum ex-mill sale price.
New Delhi: The government is considering creating a three million tonne sugar buffer stock to help millers clear about Rs 22,000 crore dues to cane growers, Food Minister Ram Vilas Paswan said said on Thursday.
Sugar mills' financial health has worsened due to sharp fall in prices of the sweetener in the wake of a record production of 31.6 million tonne (MT) so far in the 2017-18 season (October-September).
"We are still considering a proposal to create a buffer stock of 3 million tonne. We are taking views from other departments," Paswan told reporters.
A draft cabinet note on the proposal has been moved for inter-ministerial consultation after NCP chief and former agriculture minister Sharad Pawar shot off a letter to Prime Minister Narendra Modi seeking urgent intervention to deal with huge sugar glut in the market.
Besides setting up of the buffer stock, the food ministry in the draft cabinet note has proposed fixing minimum ex-mill sale price at around Rs 30 per kg, reintroducing the monthly release mechanism and imposing stock limits on mills by fixing quota for each mill, sources said. The ministry is considering fresh options because mills are not able to export 2 million tonne sweetener, even at loss, and liquidate surplus stock.
Paswan said the petroleum ministry is looking at ways to help sugar factories by tweaking policies in ethanol sector. Presently, the average ex-mill price of sugar is in the range of Rs 25.60-26.22 per kg, below the cost of production. Earlier this month, the government approved a production subsidy of Rs 5.5 per quintal for sugarcane farmers to help millers clear cane arrears.
The Centre has already 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 MT sugar. Sugar output of India, the world's second largest producer, stood at 20.3 MT in the 2016-17 marketing year. The annual domestic demand is estimated at 25 MT.