Declining rural demand plays second major role in economy’s slowdown after automobile sector. The declining consumption of FMCG products in rural areas contributed in the overall slowdown. The big giant FMCG companies like Hindustan Unilever Limited, Parle, Nestle and ITC admitted that people in rural India are not buying their products like they used to buy earlier. There are numerous reasons behind it. One of the most significant reason is payment to sugarcane farmers.
Millions of farmers are not being paid by the sugar companies in various states like Maharashtra, UP and Karnataka. The total dues to sugarcane farmers rise to more than $ 3 million which is around 25,000 crore rupees. Due to the no major movement in sugar consumption and price in India, the companies are not able to earn, unable to pay fair and FRP (fair and remunerative price) to farmers. Pending dues force them to reduce their expense. So if one spend less, the other will earn less.
What is Sugar Export Subsidy policy 2019? And Why?
To support sugarcane farmers, Indian Government has approved a Sugar Export Policy during sugar season 2019-20. In which sugar companies will a lump sum export subsidy at a rate of Rs. 10,448 per Metric Tonne to reduce the expense. So that the sugar companies can earn more and pay their dues to farmers. Government has incur a total expenditure of Rs. 6,268 crore for this policy. This amount is just to initiate the process and this budget might increase in future accordingly. It is projected that the India sugar mills will export upto 60 Lakh MT of sugar under this policy.
According to Indian Sugar Mill Association, there’s 162 Lakh Tonnes of excess sugar and 40 Lakh of buffer stock. Once the Brazilian sugar corp is over by Oct, we will export sugar with subsidy at Rs. 10.5/kg. Exporting at this price with subsidy will help Indian sugar mills to make profit and cover their dues.