Govt nod to create 4mln tons of sugar buffer stock

Govt nod to create 4mln tons of sugar buffer stock

Pictorial representation. (Reuters)

The government on Wednesday approved the creation of a sugar buffer stock of 4 million tonnes in view of bumper domestic production and pending sugarcane arrears of more than Rs 15,000 crore.

The government will spend an estimated Rs 1,674 crore for this purpose. The buffer stock will help maintain demand-supply balance and to stabilise sugar prices, an official release said.

The Food Ministry's proposal in this regard was approved in the meeting of the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi.

In August 2018, the Centre had created a buffer stock of 3 million tonnes of sugar, costing Rs 1,175 crore to the exchequer, to improve the liquidity position of the sugar mills, enabling them to clear cane price arrears of farmers and stabilise domestic sugar price.

"To protect the interest of sugarcane farmers and ensure dues are paid on time, the government has decided to create a buffer stock of 4 million tonnes of sugar, one million tonnes higher than the last year," Information and Broadcasting Minister Prakash Javadekar told reporters briefing about the cabinet decisions.

Since the 2019-20 marketing year is likely to commence with huge carryover/opening stock, building a sugar buffer stock will help maintain demand-supply balance and to stabilize sugar prices, an official statement said.

The buffer stock will be created for one year from August 1, 2019, to July 31, 2020, for which the government would be reimbursing the carrying cost of about Rs 1,674 crore to participating sugar mills, it said.

"This would improve the liquidity position of sugar mills. The reimbursement available under the scheme would be directly credited into farmers’ account on behalf of sugar mills against their cane price dues," the government added.

Welcoming the decision, industry body ISMA Director General Avinash Verma said it will help 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," he said.

India's sugar output is likely to be 32.95 million tonnes in the current 2018-19 marketing year (October-September), as against the annual domestic demand of 26 million tonnes.

According to ISMA, opening stocks of sugar are expected to be at an all-time high of around 14.5 million tonnes on October 1, 2019, as against the normative requirement of around 5 million tonnes.