New Delhi: Keeping bumper domestic production of sugar in view, the government on Wednesday approved creation of a buffer stock of 40 lakh metric tonnes (LMT), or 4 million tonnes, for a one-year period from August 1, 2019 to July 31, 2020. The move, it is expected, would improve the liquidity position of sugar manufacturers, who are grappling with pending sugarcane arrears of more than Rs 15,000 crore.
The government also said the buffer stock would help maintain a demand-supply balance and stabilise sugar prices. The government will spend an estimated Rs 1,674 crore on the buffer stock.
“To protect the interest of sugarcane farmers and ensure dues are paid on time, the government has decided to create a buffer stock of 4 million tonnes of sugar, one million tonnes higher than the last year,” Information and Broad-casting Minister Prakash Javadekar told reporters after the Cabinet meeting.
The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, approved the Food Ministry’s proposal.
In August 2018, the Centre had created a buffer stock of 3 million tonnes of sugar, costing Rs 1,175 crore to the exchequer, enabling the mills to clear cane price arrears of farmers and keep domestic sugar prices stable.
An official statement said, “Since the 2019-20 marketing year is likely to commence with huge carryover/opening stock, building a sugar buffer stock will help maintain demand-supply balance and to stabilise sugar prices.”
Welcoming the decision, Avinash Verma, Director General of industry body Isma, said the higher buffer stock will help reduce a substantial part of the sugar mills’ burden. “Not only will it give extra cash flows to sugar mills but will also hugely improve market sentiments, because creation of buffer stock will withdraw 4 million tonnes of sugar from the market for the next 12 months.”
India’s sugar output is likely to be 32.95 million tonne in the current 2018-19 marketing year—from October-September—as against the annual demand of 26 mt....