Cabinet Approves Rs.6, 268 crore Export Subsidy for Sugar

The Cabinet Committee on Economic Affairs (CCEA) on 28^th August 2019 approved the export policy to clear excess sugar stocks, few months before elections in Haryana and Maharashtra, the top cane producing states.

The policy for the 2019-20 sugar season involves an export subsidy of Rs. 10,448 / metric tonne (mt) to the sugar mills. Approximately Rs. 6,268 crore will be transferred to the farmers directly.

The move intends to counter the surplus sugar stock’s impact on prices. Low prices of sugar would make it hard for mills to pay farmers’ dues. The direct transfer will potentially control pilferage & directly reach the growers, a politically sensitive constituent that the NDA government is seeking to connect via different policy interventions.

The government in a statement said, “The subsidy will be directly credited into farmers’ account on behalf of mills against cane price dues & subsequent balance, if any, will be credited to mills’ accounts".

The sugar season 2019-20 is estimated to have an opening of 142mt and closing stock of 162mt.

It added, “The lump sum export subsidy will be given for expenses on marketing costs that will include handling, upgrading & other processing, costs of international and internal transport & freight charges on export of up to 60 lakh metric tonnes (LMT) of sugar limited to maximum admissible export quantity (MAEQ) allocated to sugar mills for sugar season 2019-20".

It must be recalled that rural distress was a main issue in the run-up to the Lok Sabha elections and the BJP government is not taking any chances. Rural distress, mainly in Maharashtra is severe with floods in the western part of the state & drought-like situation in eastern part.

In December 2018, due to rural distress, BJP lost elections in Madhya Pradesh & Chhattisgarh and this time the party does not want to take any chances. In fact, the announcement is likely to further strengthen BJP’s support base among farmers before the state assembly polls. The decision will also benefit sugar mill owners & send a clear message that the Modi-led BJP government at the Centre has been working for the benefit of farmers.

Last month, the Union cabinet had approved the creation of a buffer stock of 4mt sugar at an estimated cost of Rs. 1,674 crore. The step was aimed at increasing wholesale prices of sugar & improving cash flow to sugar mills, which in turn will help mill owners to clear farmers’ dues.