The Union cabinet on Wednesday approved the creation of a buffer stock of 4mt of sugar at an estimated cost of 1,674 crore. The step is aimed at increasing wholesale prices of sugar and improving cash flow to sugar mills, which in turn will help mill owners to clear the dues of farmers.

The cabinet decision will help farmers of poll-bound Maharashtra, Jharkhand and Haryana, where elections are due later this year. Maharashtra and Haryana are among the top sugar cane producing states.

“The decision will lead to improvement in the liquidity of sugar mills, reduction in sugar inventories, stabilization in sugar prices by alleviating of price sentiments in the domestic sugar market and, thereby, facilitate timely clearance of cane price dues of farmers," according to a cabinet statement.

The reimbursement will be directly credited to the bank accounts of farmers by the government. “The reimbursement under the scheme would be met on quarterly basis to sugar mills which would be directly credited into farmers’ account on behalf of mills against cane price dues and subsequent balance, if any, would be credited to the mill’s account," it added.

The direct transfer will potentially curb pilferage and directly reach the farmers, a politically sensitive constituent that the National Democratic Alliance government is seeking to connect through various policy interventions.

The Indian Sugar Mills Association (ISMA) said the industry has surplus sugar inventory and, therefore, the cabinet decision to subsidize the full carrying cost for 4 million tonnes of sugar for one year amounts to a direct subsidy of 1,674 crore.

Union minister Prakash Javadekar told reporters after the cabinet meeting that the creation of the buffer stock will be for one year and will come into effect from 1 August.

The cabinet also approved a proposal on the fair and remunerative price (FRP) of sugar cane payable by sugar mills for the 2019-20 sugar season, at the same rate as was offered in 2018-19. “The approval will ensure a guaranteed price to cane growers. The FRP of sugar cane is determined under Sugar cane (Control) Order, 1966. This will be uniformly applicable all over the country. Determination of FRP will be in the interest of sugar cane growers keeping in view their entitlement to a fair and remunerative price for their produce," the government said.

The FRP, fixed at 275 per quintal of sugar cane, at 10% recovery, is along expected lines, said Abinash Verma, director general of ISMA. Verma said through this decision, the government has taken care of the interests of farmers and millers.

Verma said the FRP has risen sharply in the last few years and sugarcane has outstripped returns to farmers from other crops. “It will benefit the sugar mills because 70-75% of the cost of producing sugar is only on account of sugar cane. At the same time, it will help keep cane price arrears of farmers under control. Since the average productivity of sugarcane has increased quite steeply in the last several years, the farmers will continue to get better revenue realization from the same plot of land," he added.

The cabinet also approved an amendment to Aadhaar and Others Laws (Amendment) Bill, 2019, which will allow the use of the unique 12-digit biometric data by state governments for their schemes that are funded through the “Consolidated Fund of the State". Javadekar said Aadhaar can be used for transferring state subsidies.

prashant.n@livemint.com

Shaswati Das contributed to this story

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