Industry welcomes govt decision to create buffer stock of 4 million tonnes of sugar and no hike in sugarcane FRP in 2019-20

Economy


The Union cabinet today announced that the government will create buffer stock of 4 million tonne sugar in 2019-20 to help the sugar industry deal with excess sugar in the country. It has also decided not to increase sugarcane prices from the current levels. The sugar industry has hailed both the decisions.

“The first decision to give the same FRP as last year at Rs. 275 per quintal of sugarcane at 10% recovery is on expected lines and as recommended by CACP. The FRP has increased quite steeply in the last few years and sugarcane has outstripped the returns to farmers from other crops. This decision will restore some balance amongst the crops. It will benefit the sugar mills because 70 to 75% of the cost of producing sugar is only on account of sugarcane. At the same time, it will help keep cane price arrears of farmers under control. Since the average productivity of sugarcane has increased quite steeply in the last several years, the farmers will continue to get better revenue realization from the same plot of land. Therefore, through this decision, the Government has taken care of the interests of farmers and millers at the same time,” said Abinash Verma, director general, Indian Sugar Mills Association (ISMA).

He said that the second decision to create a buffer stock of 4 million tonnes for one year, higher by 1 million tonnes over the last year, which may be effective from August 2019 1, is another very positive news for the industry. “The industry is carrying surplus sugar inventory, and, therefore, the decision of the Government to subsidize the full carrying cost for 4 million tonnes of sugar for one year, amounting to a direct subsidy of Rs. 1670 crore, will reduce a substantial part of the burden of sugar mills. Not only will it give extra cash flows to sugar mills, but will also hugely improve market sentiments, because creation of buffer stock immediately withdraws 4 million tonnes of sugar from the market for the next 12 months,” said Verma.

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