Package likely for cane farmers

A fresh financial package to facilitate payment of cane price arrears to sugarcane farmers by the mills in the private, cooperative and public sectors is slated to be announced in the coming Budget.

The food ministry's proposal to this effect is understood to have been accepted by Finance Minister P Chidambaram when he met Food and Agriculture Minister Sharad Pawar early this week to discuss Budget-related issues. The details of the package are, however, being worked out.

The outstanding arrears of sugarcane growers in the country as a whole stood at over Rs 3,046 crore at the end of the last crushing season.

Indications are that the new package may combine many of the elements of the two earlier packages offered to the states for this purpose.

Most states, barring Uttaranchal and Bihar, had declined to utilise those packages, raising a series of objections. Most of these objections will be addressed in the new package.

The total amount of assistance to be given by the Centre is likely to be raised under the new package. The combined amount of the earlier two packages was Rs 2,563 crore.

It included Rs 678 crore for the private sugar mills in five northern states (Punjab, Haryana, Uttar parsed, Uttaranchal and Bihar) that declared state-advised prices and Rs 1,885 crore for all the states for private, cooperative and public sector mills.

However, this amount fell short of the actual requirement.

The terms of package and the mode of raising money for this purpose are likely to be modified from those prescribed in the previous packages. The Centre may bear a higher level of financial burden falling on the states.

In case the states are asked to borrow money directly from the market for the sugar industry, the interest payable on such borrowing may be entirely or largely borne by the Centre.

In the earlier packages, the Centre had offered to bear only the interest in excess of 4 per cent.

A proposal to raise the cess on sugar production to mobilise additional resources for the new package is also under consideration, it is learnt.

The condition that the state governments' would not declare the state-advised cane price in future to avail the package is likely to be done away with as it has, in any case, become redundant after the recent Supreme Court judgement upholding the states' rights to fix such a price.