CCEA okays formula to pay production subsidy to sugar mills

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As the production subsidy scheme was withdrawn before time, sugar mills which have exported at least 50 per cent their export target and in case of mills having distillation capacity have supplied ethanol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.