Financial Daily from THE HINDU group of publications
Wednesday, Sep 18, 2002
Agri-Biz & Commodities
Govt considering plea for buffer stock: Yadav
NEW DELHI, Sept. 17
THE Centre is `sympathetically considering' the sugar industry's demand for creation of a buffer stock to be financed from the Sugar Development Fund (SDF), the Union Minister of Consumer Affairs, Food and Public Distribution, Mr Sharad Yadav, has said.
Addressing the 43rd annual general meeting of the National Federation of Cooperative Sugar Factories Ltd (NFCSFL) on Monday, the Minister said the Centre would examine the issue of creating a buffer, provided that the benefit from this is ``passed on to cane growers''.
Creation of a buffer stock would basically entail the Centre sequestering these quantities on its account. While the stocks would continue to be maintained by the factories, the carrying cost interest, storage and insurance charges would, however, be borne by the exchequer.
Besides by this direct subsidy, mills also stand to gain by way of being able to obtain 100 per cent bank credit on the sequestered quantities without having to provide for the normal 15 per cent margin money on the borrowed sum.
Mr Yadav noted that till recently, it was mandatory for mills to utilise the additional credit availed (i.e margin money benefit) on buffer stocks to pay cane price dues to growers. But following an amendment made to the SDF Rules (in December 2001), it has now been stipulated that the buffer subsidy amount, too, will have to be used for cane payments to growers, including liquidating their past arrears.
``Once the Cabinet approves the creation of a buffer stock on Government account, the subsidy would be credited to a separate account of individual mills, who, in turn, are to use this money to first clear all current and past payment dues to sugarcane growers. The latter will have first charge on both the buffer subsidy as well as additional bank credit on account of margin money waiver,'' an official explained.
Earlier, the President of NFCSFL, Dr M.R. Desai, urged the Centre to facilitate the creation of a buffer stock of at least 20 lakh tonnes (lt), which, he felt, would considerably mitigate the mounting inventory cost burden on mills arising from excess sugar production in the last four crushing seasons.
According to the industry, the financial provision for this already exists in the Sugar Cess Act, 1982. Under this, the Centre has been levying a fixed cess of Rs 140 per tonne of sugar since November 1982, with the monies from this going to SDF. Of the Rs 140 per tonne cess, Rs 90 is supposed to go for ``defraying the expenditure for the purpose of building up and maintenance of buffer stocks of sugar'' and the rest towards activities such as modernisation of factories, cane development, research and development, etc.
Sugar mills had begun the current 2001-02 crushing season (October-September) with opening stocks of 103.63 lt. With production estimated at 184-185 lt and internal consumption and exports amounting to 170 lt and 10 lt respectively, the industry' closing stocks at the end of the season are expected at around 108 lt, which is enough to meet more than seven months' domestic requirement.
For all the `sympathetic consideration' of Mr Yadav, whether the Finance Ministry would agree to the creation of a buffer stock of 20 lt to be financed through the exchequer is, however, a moot point. It is estimated that the carrying cost of even 10 lt of buffer would be in the range of Rs 200 crore.
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