The petroleum ministry is looking at raising the ethanol price from the existing Rs 40.85 per litre by another Rs 6-7 a litre so that mills can makes payment to farmers at the earliest.
The Centre is expected to soon announce a Rs 8,000-crore package to help sugarcane farmers who have long waited for their dues from sugar mills, several reports said on Monday. The carrying cost of the sweetener would be borne by the government, which is estimated to cost the exchequer around Rs 1,300 crore, they said.
The measures include building a 3 million tonne government stockpile to soak up excess supply from the domestic market and granting soft loans worth 45 billion Indian rupees ($670 million) to help millers expand their ethanol production capacity, Food Minister Ram Vilas Paswan said.
Days after the ruling BJP suffered an electoral setback, primarily in the sugarcane-growing belt of western Uttar Pradesh, and with farmers in parts of the country stopping supplies of essential commodities to protect price fall, the Centre is expected to announce a fresh package of nearly Rs 80 billion to bail out the sugar sector.
"If the sugar mills still not pay the dues to the farmers, the States have all the rights to take punitive action against them", Paswan said.
The Government had in the last few months announced several other measures to improve the liquidity position of sugar mills. The mounting cane arrears was said to be one of the reasons why the BJP lost a recent Lok Sabha bypoll in Kairana, a sugar belt in Uttar Pradesh.
The arrears have crossed Rs 22,000 crore, more than half of which is for farmers from UP. It has also asked mills to export 2 million tonnes of sugar. Industry watchers believe the worst is yet to come given the high acreage of crop planting this time.
Further government interventions included increase in custom duty on import of sugar from 50 per cent to 100 per cent, removal of custom duty on export of sugar, imposition of reverse stock holding limits on sugar mills for the months of February and March 2018, allocation of mill-wise Minimum Indicative Export Quota (MIEQ) of 20 LMT and financial assistance at the rate Rs.5.50/quintal of cane crushed amounting to about Rs 1,500 crore.
BJP, in his manifesto for the 2017 assembly polls, had promised payment to farmers within 14 days of selling sugarcane to the mills.