The Union Cabinet today approved a Rs 8,000-crore bailout package for the sugar industry to help the cash-starved mills clear cane dues of Rs 22,000 crore.
It has also approved a plan to create a three million tonne buffer stock to balance the demand and supply mismatch, Law Minister Ravi Shankar Prasad told reporters in a briefing following the Cabinet meeting.
The bailout package was proposed after the financial health of sugar mills worsened due to a sharp fall in prices following a record sugar production of over 31.6 million tonnes so far in the 2017-18 marketing year (October-September).
A panel formed by the Goods and Services Tax Council had earlier suggested a sugar cess to compensate sugarcane farmers as prices plunged and mills struggle to clear arrears. The other options explored by the committee are a higher production-linked subsidy and reducing the GST rate on ethanol as the government reviews a proposal to offset the drop in sugar prices by increasing the production of ethanol.
No decision has been taken on the imposition of the cess as the panel still awaits the opinion of Attorney General KK Venugopal on the matter.
Most sugar stocks pared losses after the Cabinet's decision. Shares of Avadh Sugar & Energy Ltd. rose as much as 8.4 percent to Rs 375. While Uttam Sugar Mills Ltd. gained as much as 7 percent, Ugar Sugar Works Ltd. and Sakthi Sugars Ltd. rose 6.5 percent and 6.3 percent intra-day, respectively.
Watch this conversation with former Agriculture Secretary and Senior Fellow at ICRIER Siraj Hussain.
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