Sugar Crisis

Sugar prices had been declining while the price of sugarcane had been steadily increasing rendering the operations of sugar mills unviable.Ethanol, which is a plentiful product in the sugar manufacturing process and is blended with petrol, can be a vital revenue earner for the mills.Currently ethanol blending is only at around 3 per cent. It could easily be raised to 10 per cent which would reduce sugar surplus and reduce sugar prices.he government should buy 3 million tonnes of sugar at cost of production to reduce supply and store it as a buffer. The sugar industry feels that increasing the import duty on sugar from the current 25 per cent to 40 per cent will be a solution for the longer-term.Decreasing import and promoting export of sugar is the key to curb supply.

To help resolve the sugar crisis, Centre has asked states to reschedule the repayment of interest-free loans by the industry to seven years instead of five and extend financial assistance from the Sugar Development Fund to industry for modernisation and ethanol blending, apart from raising the import duty to 40 per cent. Create a buffer stock to absorb the surplus sugar which has resulted in price fall. The States were divided on this issue: some of them wanted financial assistance to be given to mills to enable them to clear arrears, while some others wanted the farmers to be assisted directly by the government.

Union Cabinet decided to hike the import duty on sugar to 40 per cent from the current 25 per cent to check the slide in domestic prices of the sweetener and enable the industry to clear cane arrear.