Cabinet may tomorrow consider Rs 7,200 cr loans to sugar mills

Proposal is in line with relief measures recommended by the PM-constituted ministerial panel, headed by Sharad Pawar

The Cabinet is likely to consider tomorrow a proposal on providing interest-free loans of Rs 7,200 crore to the cash-starved sugar industry for making sugarcane payment to farmers.

"The proposal on giving a financial package to the sugar industry will come before Cabinet at the earliest," Food Minister K V Thomas told reporters after the meeting of an informal group of ministers (GoM) on the sugar issue.

A source said the Food Ministry's proposal on giving Rs 7,200 crore interest-free loans to the beleaguered sugar industry is expected to come before the Cabinet for discussion tomorrow itself.

The proposal is in line with relief measures recommended by the PM-constituted ministerial panel, headed by Agriculture Minister Sharad Pawar, to address the cash crunch facing sugar mills and their inability to pay higher cane prices this season. Mills have cane arrear of Rs 3,400 crore. The remaining amount will be utilised for this year's payments.

Concerned that non-payment of cane arrears would increase farmers' woes ahead of the general elections, the ministerial panel today met again to examine additional sops for millers to help improve their working capital.

Thomas said: "In the GoM, we discussed about other incentives, especially reducing the period for re-export of imported sugar from the existing 18 months. We heard views from the industry. No decision has been taken."

Besides Pawar and Thomas, Finance Minister P Chidambaram, Petroleum Minister Veerappa Moily and Civil Aviation Minister Ajit Singh were present at the meeting.

The representatives from Indian Sugar Mills Association, National Federation of Cooperative Sugar Factories Ltd, and top officials of Shree Renuka Sugars, EID Parry's and Simbhaoli Sugars were also present in the meeting.

In the Cabinet note, the Food Ministry has proposed that loans worth Rs 7,200 crore would be provided by banks to the sugar mills exclusively for sugarcane payment.

Banks will lend equivalent to the excise duty paid by mills in the last three years, while the entire interest of 12% would be borne by the Centre and Sugar Development Fund.

Mills would have to repay the loans in five years and can avail of a moratorium on repayment in the first two years.

Sources said the Food Ministry is expected to move a separate Cabinet note for giving additional incentives to the industry as suggested by the PM panel.

Besides interest-free loans, the panel had recommended recasting of loans taken by mills as per Reserve Bank norms, incentives to produce 4 million tonne of raw sugar and setting up of buffer stock, besides doubling ethanol-blending in petrol to 10%.

The sugar industry is facing financial problems due to higher cost of production and lower sugar prices in the wake of surplus production in the last few years.