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Amid farm stir, Cabinet clears Rs 3.5k crore sugar export subsidy

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17 December 2020, IN: The decision comes amid a persistent standoff between large farm unions and the government over three recent laws that aim to liberalise the farm economy.

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The Cabinet Committee on Economic Affairs has approved a Rs 3,500 crore subsidy to export sugar by millers amid a glut, a farmer-friendly move through which India is set to offer sugar export subsidies for a third year in a row to pare surplus stocks and ensure domestic prices don’t crash.

Export subsidies are necessitated when exports becomes unviable because international prices are lower than domestic prices.

“Cabinet has taken the decision to help farmers directly by depositing money of subsidy into their accounts. The subsidy will be given on 60 lakh tonnes of sugar exports at the rate of Rs 6,000 per tonne,” Union minister Prakash Javadekar said on Wednesday.

The minister said the subsidy will benefit 50 million cane farmers in the country. Uttar Pradesh, Maharashtra and Karnataka are among the three largest cane-producing states.

India is the world’s largest sugar consumer, but 90% of the country’s output goes into commercial food products while 10% is bought by household consumers.

The decision comes amid a persistent standoff between large farm unions and the government over three recent laws that aim to liberalise the farm economy. The subsidy is likely to be highlighted by the government as a key step towards as it battles the massive agitation by farmers against moves to deregulate agricultural markets.

“The decision to continue cane subsidy is welcome. This will however have no impact on our agitation (against the new laws),” said Rakesh Tikait of the Bharatiya Kisan Union (Tikait faction).

Plentiful stocks, the highest since 2012, cheaper imports and mounting dues millers owe to the tune of over Rs 12000 crore have accentuated woes of sugarcane farmers. The subsidy will help farmers get speedier payments and millers to stay profitable.

“Farmers sell their sugarcane to the sugar mills, however the farmers are not getting their dues from the sugar mill owners as they have surplus sugar stock. To address this concern, the Government is facilitating the evacuation of surplus sugar stock. This will enable payment of dues of the sugarcane farmers. Government will incur about Rs 3,500 crore for this purpose, and this assistance would be directly credited into farmers’ accounts on behalf of sugar mills against cane price dues and subsequent balance, if any, would be credited to mill’s account,” an official statement said.

The country could produce over 31 million tonnes of sugar this season, well above the expected domestic demand of about 26 million tonnes.

“The subsidy amount is lower than last year but considering that the world sugar prices are higher as compared to what they were at the same period in the last season, the industry is confident to perform well again in 2020-21,” said Abinash Verma, the chief of Indian Sugar Mills Association.

This subsidy will cover costs on account of marketing, handling, upgrading, costs of international and internal transport and freight charges on export of up to 60 lakh tonne of sugar limited or the maximum admissible export quota allocated to sugar mills for sugar season 2020-21.

“This decision will benefit the five crore (50 million) sugarcane farmers and their dependents, as well as the five lakh (500,000) workers employed in the sugar mills and related ancillary activities,” Javadekar said.

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