New Delhi: The central government on Wednesday approved a 5,500 crore package for sugarcane farmers struggling because of dues pending from cash-strapped sugar mills.

Unsettled payments to cane growers is likely to be a potent political issue in states such as Uttar Pradesh, Maharashtra, and Karnataka ahead of the general elections to be held in 2019, with mills owing farmers about 13,000 crore in the wake of a production glut and a crash in wholesale sugar prices.

The Bharatiya Janata Party (BJP) is in government in both Uttar Pradesh and Maharashtra and is the single-largest party in Karnataka.

In May, the ruling BJP had lost the prestigious Lok Sabha bypolls in Uttar Pradesh’s Kairana where dues to cane farmers took centre stage.

For the sugar season 2018-19 which begins in October, the centre will pay 13.88 for every quintal of sugar crushed by mills directly to farmers’ bank accounts. This will involve a cost of 4,163 crore. The centre will also spend 1,375 crore to facilitate exports of sugar by bearing a portion of the transport and freight costs.

In 2017-18, production of sugar rose to 32 million tonnes, a staggering 60% increase year on year. Production in 2018-19 is estimated to grow to 35 million tonnes, compared to annual domestic consumption of around 26 million tonnes, with farmers raising the area under sugarcane this kharif season.

Dues to sugarcane growers touched a record 23,232 crore in May before falling to 12,988 crore at present. The dues are likely to increase as sugar mills begin crushing next month. In the 2018-19 season, India’s surplus sugar stocks are likely to rise to a staggering 16.5 million tonnes.

“To ensure that sugar stocks do not pile up, the government has also set a target of exporting 5 million tonnes of sugar for 2018-19 sugar season... the challenge is that due to low international prices only 600,000 tonnes could be exported out of last season’s target of 2 million tonnes," food minister Ram Vilas Paswan said.

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