The Cabinet Committee on Economic Affairs (CCEA) today approved a new formula to calculate production subsidy to sugar mills for the ongoing 2015-16 season after taking into account lower sugar production and exports.
To address liquidity stress in the sugar industry and facilitate timely payment of cane arrears, the Centre last year had announced a subsidy of Rs 4.50 per quintal of cane crushed during October 2015-September 2016 season with a condition that mills meet the export quota of four million tonnes and ethanol blending target.
The subsidy scheme has now been discontinued and the government is yet to make payments to mills.
"The CCEA today approved the revised formula to determine the production subsidy to sugar mills for 2015-16 season taking into account lower cane crushing, sugar production and exports in view of drought in parts of Maharasthra and Karnataka," a senior Food Ministry official said.
As per official statement, the CCEA has approved the revision in the export quota and ethanol supply target for calculating the production subsidy.
"This has been done to offset cost of cane and facilitate timely payment of cane price dues of farmers," it said.
With the revised formula, the production subsidy outgo to sugar mills would come down to Rs 600 crore as against previously estimated Rs 1,147.5 crore, sources said.
As the production subsidy scheme was withdrawn before time, sugar mills which have exported at least 50 per cent their export target and in case of mills having distillation capacity have supplied ethanol as per revised schedule would be eligible for production subsidy, an official statement said.
"However, production subsidy on actual cane crushing would be provided to sugar mills proportionate to their achievement on export and ethanol supply targets with equal weightage," it clarified.
The production subsidy was initially calculated based on the estimated cane crushing of 255 million tonnes in the 2015-16. But the cane crushing has come down due to drought. Consequently, sugar output is also estimated to be lower at 25.2 million tonnes this season.
"Initially, the export quota target was scaled at 15.70
kg of sugar for each tonne of 'estimated cane crushing'. Now, the export quota would be revised on a scale of 15.70 kg of sugar for each tonne of cane 'actually crushed' by the mills during current sugar season or previously notified export quota target, whichever is lower," the statement said.
Similarly, mill/distillery-wise ethanol supply target will be revised to actual quantity contracted by them for supply to Oil Marketing Companies (OMCs), it said.
In case of mills/distillery not offering supplies ethanol so far, the existing allocation already notified, will remain unchanged, it said.
The performance of ethanol supply would be assessed on the basis of actual supply made against pro-rated supply schedule fixed by OMCs till June, 2016 with respect to contracted quantities, it added.
Mills have been able to export 1.6 million tonnes compared with the target of 4 million tonnes for this year as domestic prices improved after the scheme.
The scheme was discontinued as sugar rates improved plus domestic production was estimated to be lower at 25.1 million tonnes for 2015-16 season as against 28.3 million tonnes in the previous year.
