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The government will provide soft loans of Rs 6,000 crore to sugar mills to help them clear part of their Rs 21,000-crore dues to farmers. But many in the sugar industry are not liking the fact that this payment is going to be made directly to farmers’ bank accounts, through the Pradhan Mantri Jan Dhan Yojana to the extent possible.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday decided that the government would not charge any interest on the loan for a year, itself bearing the burden of about Rs 600 crore.
However, there is another catch as well: These loans will be provided only to those units that have cleared at least 50 per cent of their outstanding arrears by June 30.
“Mills have not been able to make payments to farmers because of low domestic prices and high production. Cane arrears have reached Rs 21,000 crore,” Union Road Transport Minister Nitin Gadkari said after the Cabinet meeting.
The government has mandated that banks will obtain from sugar mills a list of farmers, with bank account details and the extent to which cane dues are to be paid. The idea is to make direct transfer of dues to the bank accounts of farmers on behalf of sugar mills. Subsequent balance, if any, would then be credited into account of the mill concerned, Gadkari said.
But the method seems to have irked the sugar industry. “Companies will have to carry the burden of this additional loan on their books and pay regular interest (after one year). Also, when the payment is made directly to the farmer, why should industry take the debt burden? They should just pay it off as a welfare scheme from the Government of India,” said Rajshree Pathy of Rajshree Sugars and Chemicals Ltd.
In fact, it was not for the industry that the government was providing this soft loan; it was for farmers, Gadkari explained. “This decision is not to support the industry. We are keeping farmers’ interests in mind.”
Pathy said the real issue — of additional sugar stocks and excess production this season — was yet to be dealt with.
Indian Sugar Mills Association Director-General Abinash Verma said: “It is not an interest-free loan. It is an unproductive loan. The amount and moratorium will not address the basic problem of a surplus and depressed sugar prices.”
India’s sugar production is estimated to cross 28 million tonnes in the 2014-15 marketing year (October-September), against 24.3 million tonnes the previous year. The total annual demand is pegged at only 24 million tonnes.
Explaining that the cost of raw material was more than that of the end product, Gadkari said sugar prices had fallen to Rs 22 a kg from Rs 34.
Meanwhile, the Union Cabinet also expressed concern over rising prices of pulses and decided to import it in a large quantity to augment supply. It also asked states to take action against hoarders.
“The Cabinet discussed the issue of rising prices of pulses. The prime minister has directed import of pulses to keep domestic prices under check,” Gadkari added.
The rise in prices of pulses could be gauged from the fact that while the wholesale price index-based inflation remained in the negative for a sixth month in April, the prices of pulses during the month rose 15.38 per cent over a year earlier. Similarly, retail inflation for pulses in April stood at 12.52 per cent, against 5.11 per cent general inflation.
News agency PTI quoted Food Minister Ram Vilas Paswan as saying: “We will import pulses in whatever quantity that is required... We have asked state governments to take action against hoarders.”
Among other decisions, CCEA approved continuation of urea production from Madras Fertilizers Ltd (MFL), Mangalore Chemicals and Fertilizers (MCF) and Southern Petrochemical Industries Corporation (SPIC) using naphtha as feedstock, to ensure smooth supply of urea in Tamil Nadu, Kerala and Karnataka. This would have otherwise been stopped, as the pipelines to convert these plants to gas-based ones are yet to be laid.
The total requirement for Karnataka, Tamil Nadu and Kerala is 2.3 million tonnes, and the annual production from these three units comes to 1.5 mt per year.”
