Commodities Buzz: Indian govt announces 1-bln-USD bailout package for ailing sugar industry

The Indian government on Wednesday announced a one-billion-USD bailout package for the countrys ailing sugar industry. Farmers across the country have been up in arms for the past six days demanding their pending sugarcane dues and better minimum support prices (MSP) for their crop. The agitating farmers have blocked supplies of other vegetables and milk from villages to cities, alleging that they were not getting good prices for their produce. As a result, prices of veggies have been on rise over the past few days.

As per rough estimates, nearly 3.3 billion U.S. dollars have been due on the cash-starved sugar mills across the country, particularly in northern states of Uttar Pradesh and Punjab, and southwestern state of Maharashtra. There are around 190 sugar mills in the country.

Excess production during the current sugar season, and indication of higher production in the ensuing season, had been continuously depressing the market price of sugar in India. Due to the depressed market sentiment and crash in sugar prices, the liquidity position of the sugar mills had been adversely affected leading to accumulation of cane price dues which had already reached to an alarming level of more than 3.3 billion U.S. dollars.

The government also decided to create a buffer stock of 3 million metric tons of sugar for one year and to incur estimated expenditure of 177 million USD for the purpose.