The Narendra Modi government is likely to announce a direct cash subsidy for sugarcane growers, a significant farm-policy decision amid a lingering agrarian crisis that has roiled the rural economy.
The government is also planning an overhaul of some regulations in the influential sugarcane sector in the world’s second-biggest producer, said an official who wished to remain anonymous. The measures are aimed at blanching growing farmer dissent as well criticism from struggling mill owners, ever since a glut touched off a serious crisis in major sugar-producing states, such as Uttar Pradesh, Maharashtra and Karnataka.
Nearly 800 crisis-ridden farmers have committed suicide this year, including canegrowers, according to figures disclosed in Parliament.
India is also the world’s largest sugar consumer, but 90% of the country’s output goes into commercial food products while only 10% is bought by household consumers. So, sugar prices impact almost every other food item, for instance biscuits.
Plentiful stocks, the highest since 2012, cheaper imports and mounting dues millers owe to farmers have accentuated the farm crisis. The dole would help farmers get timely payments and millers to stay profitable, while some specific steps are aimed at preventing similar gluts from building up or prices from swinging wildly, said an official.
The so-called “production subsidy” will be the government’s contribution towards the state-determined price of cane, which miller-owners must pay to farmers, a politically influential lobby. The subsidy will lessen financial burden of cash-strapped millers while ensuring part of farmer dues are regularly paid by the government to farmer accounts. Mill owners owe over Rs 12,000 crore in delayed payments to thousands of farmers. “The subsidy, which could be to the tune of Rs 1,200 crore, will not require additional budgetary provisions because it would be used up from an existing Sugar Development Fund,” an official said.
The government will also make the sugar cess a dynamic one: when prices are high, the levy will be low and vice versa. This will help keep sugar prices within a certain range. Along with this, the Centre will also put out advisories of how much mills should export to avoid gluts or devote resources to produce ethanol, a cane byproduct used to blend with fuel, to stay financially viable.
India produced 28.1 million tonnes of sugar in the 2014-15, against a domestic requirement of 24 million tonnes. Although the government estimates the country’s output for 2015-16 will be lower at 26 million tonnes, oversupply caused prices to crash.