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Rs 6,600-cr sweetener for sugar mills

Govt clears interest-free loans to clear cane farmer arrears; proposal on raising grain buffer stocks to GoM

BS Reporter New Delhi
Last Updated : Dec 20 2013 | 12:53 AM IST
Sugar mills will be eligible for a combined Rs 6,600 crore of interest-free loans, to be able to pay arrears to cane farmers. The Cabinet Committee on Economic Affairs (CCEA) cleared a proposal in this  regard on Thursday.

The original proposal was to give interest-free loans of Rs 7,200 crore. CCEA has also allowed mills to sell sugar without any quantitative restriction.

However, it decided to retain the mandatory limits on grain buffer stocks, against a proposal to increase these, in view of the new food security law. It decided to refer the matter to a panel for closer scrutiny, comprising Agriculture Minister Sharad Pawar, Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia.

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Some officials said the proposal to raise the buffer limit apparently met  with some objection over subsidy implications, while there was concern over World Trade Organization rules as well. “Buffer stocking norms will continue as it is for the time being and we will revisit it later, as presently there is no correlation between procurement and stocking norms and annual grain procurement is much more the stocking norms,” Food Minister K V Thomas told reporters.

On reducing the loan amount for sugar mills from Rs 7,200 crore, the minister said there had been a recalculation by the department. “The other decisions related to the sugar industry will be taken up next week,” he said.

The interest-free loans for sugar mills will be repayable in five years, with a moratorium on payment for the first two years. Interest at 12 per cent would be paid from the Sugar Development Fund, against the earlier proposal of five per cent by the government and seven per cent from the fund, officials said. SDF is created from a cess collected on sugarcane crushing. Hence, it will take a hit of Rs 2,750 crore against the earlier  estimate of Rs 3,159 crore.

Welcoming the decision, Abinash Verma, director-general of the Indian Sugar Mills Association, said: “It’s a wonderful gesture by the central government for both the farmers and the industry. It will help the industry reduce around Rs 500 crore annually of interest burden in the next five years.”

Sugar production in 2013-14 is estimated at 24.4 million tonnes,  around three per cent less than last year. Millers in UP and elsewhere were earlier on a confrontation with the government and  farmers  over the cane price to be paid.  

Regarding grain procurement, the proposal was to raise the buffer stocking and strategic reserve limit of Food Corporation of India for both wheat and rice, by at least 50 per cent over the current norms. The previous such exercise to alter the buffer norm was in 2005. After that, an extra five million tonnes of wheat and rice was added as strategic reserve from 2009.

The proposal was on the lines of a study conducted by the National Centre for Agricultural Economics and Policy Research. At present, government foodgrain stocks are almost double than the requirement, which further rises during the peak procurement season.

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First Published: Dec 20 2013 | 12:45 AM IST

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