NITI Aayog task force recommends scrapping sugar buffer subsidy plan

Wednesday, Jul 29, 2020


By Preeti Bhagat


NEW DELHI – A NITI Aayog task force has recommended scrapping of the buffer stock subsidy scheme for sugar on grounds that it incentivises mills to over produce and is an additional expense for the government, a source said.


"The maintenance charges given to mills act as an additional expense on the government exchequer as the stocks are usually resold in the market the following year… The task force feels that there is no justification for continuation of the scheme in its current form," the task force said in a report submitted to the Prime Minister's Office. 


For 2019-20 (Aug-Jul), the Union Cabinet had approved the creation of a 4-mln-tn sugar buffer stock, which cost the government 16.74 bln rupees.


The government had approved creation of the buffer stock to improve the liquidity problem of sugar mills and help reduce uncertainties of demand and supply. The reimbursement under the scheme is directly credited into farmers' accounts on behalf of mills against their cane price dues.


"The task force feels that the buffer stock of sugar is only notional in nature and not in sync with government policies regarding food security as is the case in wheat and rice," according to the recommendation.


On the other hand, the food ministry in June had requested the Prime Minister's Office to extend the buffer stock subsidy scheme by another year.


The current buffer stock subsidy plan is due to end on Jul 31. Usually, the Centre makes mill-wise allocation of buffer stock and every factory has to set apart the quantity allotted.


"The buffer stock scheme is being worked on internally as of now… It may come into effect with a delay of a month this year from Sep 1 after (the Union) Cabinet's approval," a food ministry official said.


"The extension of buffer stock will reduce a substantial part of the burden of sugar mills. Not only will it give extra cash flow to sugar mills, but also improve market sentiment," an industry official said.


At a time when output is expected to bounce back to 30.5 mln tn next season while annual domestic consumption is only 25 mln tn, the extra sugar produced will only add to swelling stocks.


The government expects opening stocks for 2020-21 (Oct-Sep) to stand at 11.5 mln tn.  End


Edited by Subham Mitra


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