India: Yet another sweetener for sugar companies before elections

  • The new relief package could entail the Centre facilitating loans worth nearly INR120, 000mn for which the ex-chequer will bear the 5-6% interest subvention for 5 years. The loans will be granted for enhancing ethanol production, a government official told ET Now. he package is being finalised by the Prime Minister’s Office, Finance Ministry, Agriculture Ministry and the Food Ministry. The impact on the fisc is yet to be calculated, added the government official.
  • “We received 282 proposals from sugar mills when the package was announced Sep 18. But it was possible to only approve 114 at that time with the funds provides. So many more mills and distilleries stand to benefit,” the government official explained to ET Now.
  • Besides helping the debt-ridden sugar companies–with mills struggling to clear outstanding arrears to cane farmers–the relief package is also being seen as one of the ways to reduce India’s capacity for crude imports. Besides that, the agriculture ministry is pitching the package as an environment friendly move. It believes the sops can enable sugar mills to divert cane for the production of the eco-friendly ethanol.
  • India is staring at a second consecutive year of surplus sugar production this season. Indian Sugar Mills Association has estimated the country’s sugar output in 2018-19 at 31.5-32mn tonnes. With carryover stock from this season seen at about 10.4mn tonnes, the total supply in 2018-19 is pegged at 41.9-42.4mn tonnes, way higher than the estimated consumption of 25.5mn tonnes.

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