NEW DELHI: Days after the bypoll setback in Kairana, which is in the heart of north India’s sugar belt, the Centre has readied a more-than-Rs 8,000 crore package for the sugar sector to help mills clear payment of arrears to sugarcane farmers.

The arrears have crossed Rs 22,000 crore, more than half of which is for farmers from UP. The package will include creation of buffer stock of 3 million tonnes for which the money will be transferred directly to accounts of farmers.

TOI had first reported on May 18 + about the proposal to create buffer stock and setting minimum price of sugar at factory rate.

Government sources said the creation of buffer stocks is estimated to cost around Rs 1,200 crore. Mills will keep the stock with them and the government will pay for maintenance, warehouse and other financial costs.

Sources said the package will also include a scheme worth more than Rs 4,400 crore for increasing ethanol capacity, which will help in diversion of sugarcane in surplus season to facilitate timely payment of dues to farmers.

The government has also decided to fix the minimum price for sale of sugar at around Rs 29 a kg, though the sugar millers had been demanding it to be in the range of Rs 34-35. “At the same time, a mechanism will be put in place to ensure that the retail prices of sugar are kept fully under control and sufficient supplies are maintained throughout the year,” a source said.

The decision is likely to be taken by the cabinet in the next two days, officials said.