The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi has given its approval for providing a lump sum export subsidy at Rs. 10,448 per metric tonne (MT) to sugar mills for the sugar season 2019-20. The total estimated expenditure of about Rs.6,268 crore will be incurred for this purpose.
The lump sum export subsidy will be provided for expenses on marketing costs including handling, upgrading and other processing costs, costs of international and internal transport and freight charges on export of up to 60 Lakh Metric Tonne (LMT) of sugar limited to Maximum Admissible Export Quantity (MAEQ) allocated to sugar mills for the sugar season 2019-20.
The subsidy would be directly credited into farmers’ account on behalf of mills against cane price dues and subsequent balance, if any, would be credited to mill’s account. The subsidy shall be in conformity with the provisions of Article 9.1 (d) and (e) of Agreement on Agriculture (AoA) and thus WTO compatible.
In the wake of surplus sugar production during sugar season 2017-18 (October – September) and sugar season 2018-19, notwithstanding various measures taken by the government, the ensuing sugar season 2019-20 is expected to commence with an opening stock of about 142 LMT and season end stock are expected to be about 162 LMT.
The surplus stock of 162 LMT of sugar would create downward pressure throughout the season on sugar prices affecting liquidity of the sugar mills thereby leading to accumulation of cane price arrears of farmers.
To deal with this situation, the Government has recently created buffer stock of 40 LMT of sugar for one year from August 1, 2019. However, even after taking into account this buffer stocking of 40 LMT till July 31, 2020 and likely diversion of sugar by way of production of ethanol from B-heavy molasses/cane juice during SS 2019-20 and requirement of normative stock for two months, there shall be about 60 LMT of excess sugar stock that will need evacuation through export.