The cash-strapped Punjab government is extending a subsidy of over Rs 210 crore to seven private sugar mills, all owned by politicians, when there is clearly no need of it.The money is being given at a time when the sugar prices are heading up, not down — the rationale given for the cash assistance.When the subsidy meant to be passed on to growers, of up to Rs 50 per quintal of sugarcane, was approved by the Cabinet in November last year, the sugar prices were at an all-time low of Rs 2,400 per quintal.This prompted a committee to recommend assistance of Rs 35-50 per quintal, in the interest of farmers, for the seven private and nine cooperative mills after they pleaded for help to pay at least the State Advised Price (SAP), or procurement price, of Rs 280-Rs 295 per quintal.At present the sugar prices are touching Rs 3,400-3,700 per quintal, but the subsidy will still be extended, resulting in huge profits for the mills.
The Cabinet last year, and even 10 days back, ignored suggestions to link the subsidy to sugar prices at the end of the crushing season (April this year), and offer it only in case the sugar prices remained low.It instead stood by its decision to approve a flat subsidy to all sugar mills. The logic given was that there is no “authentic way” to determine the sugar prices, as the price variation is huge even on commodity exchanges and websites.Amongst those likely to make profits are sugar mills owned by Akali leader and Markfed chairman Jarnail Singh Wahid, Chief Minister’s Industrial Adviser Kamal Oswal, late liquor baron Ponty Chadha’s family, controversial Uttar Pradesh politician DP Yadav and Congress MLA Rana Gurjit Singh. Nearly 70 per cent of the cane in Punjab is crushed in private mills.Since the sugar prices have touched Rs 3,400-3,700 per quintal and considering the cost of production at most to be Rs 2,900-3,000, the mills would be making a profit of Rs 500-700 per quintal.
That, however, has not stopped the government from extending a subsidy of Rs 210-225 crore after the mills crush 460 lakh tonnes of sugarcane.An Agriculture Department official said while the mills have paid Rs 245 per quintal to cane growers, the balance (Rs 35-50 per quintal) is paid to them through the government treasury.So far, Rs 110 crore has been paid as this subsidy to the private and cooperative mills.In the 2015-16 crushing season, Rs 1,900 crore was the total payment due to sugarcane farmers, of which Rs 1,400 crore has been paid.This year, of the 664 lakh quintals of sugar produced, 30-35 per cent was sold by the state’s sugar mills during the crushing season (November 2015 to April 2016).The remaining stock will be sold now. Industry sources said the sugar recovery this year was 103-105 kg from 10 quintals of cane, much higher than the average of 9.5 kg.