Rs 7.2k-cr free loans for sugar mills

A part of the interest on the loans will be borne by the Centre and the rest by the Sugar Development Fund

A high-level government panel on Friday decided to offer a relief package to the sugar sector that includes interest-free Rs 7,200-crore loans from banks. A part of the interest on the loans aimed at helping millers clear dues to farmers will be borne by the Centre and the rest by the Sugar Development Fund (SDF) created from the cess collected on cane crushing.

Of the 12 per cent interest, seven per cent will be borne by the SDF and five per cent by the Centre, Agriculture Minister Sharad Pawar, head of the group of ministers, said after a two-hour meet of central and chief ministers and officials of sugar-producing states.

The group includes Finance Minister P Chidambaram, Civil Aviation Minister Ajit Singh, Food Minister K V Thomas and Petroleum Minister M Veerappa Moily.

“However, millers have to ensure the loans are availed from banks only,” Pawar said, adding according to rough estimates, Rs 7,200-crore loans would be availed by millers from banks. These loans can be repaid in five years; there will be a moratorium for the first two. Millers have also been allowed to restructure all their existing loans, according to the Reserve Bank of India’s guidelines.

The GoM decided to grant millers incentives to produce four million tonnes (mt) of raw sugar in the 2013-14 crushing season. “This incentive has not been quantified yet, but it would be WTO (World Trade Organization)-compliant,” Pawar said. India mainly produces raw sugar and imports refined one.

It is estimated in 2013-14, production would be 24.4 mt, three per cent less than last year.

Pawar said the GoM had accepted millers’ demand to raise mandatory ethanol blending from the current five per cent to 10 per cent to enable guaranteed cash flow. To ensure this is implemented in a smooth manner, an inter-ministerial committee, with representatives from the departments of food and agriculture, will coordinate with oil marketing companies and sugar mills by next week.

On imports of sugar, which were partly blamed for the current glut in the sugar market, Pawar said the government would keep a watch on these and, if required, raise the duty to a reasonable level. Currently, the government imposes import duty of 15 per cent on sugar. The iGoM also directed the food ministry to prepare a detailed note on millers’ demand for 2 mt of buffer stock, along with the financial and budgetary implication of this for 2013-14 and 2014-15.

“We have requested all sugar-producing states to appoint committees to re-assess different methods of sugarcane pricing, which should be based on the principle of revenue-sharing,” the agriculture minister said.

Sugar millers in Uttar Pradesh and a few other states have been at loggerheads with farmers over inability to pay high price for cane. Recently, about 70 of the 99 private sugar mills in Uttar Pradesh suspended operations for about 11 days.

The Indian Sugar Mills Association said the Friday’s announcements would help the industry face the current financial crisis and clear arrears of farmers. These would also enable millers to venture into a new product mix, the association added.