The Uttar Pradesh government on Wednesday decided to waive off the prerequisite government guarantee and fee for cash credit up to Rs 1,414.17 crore, required for its cooperative sugar mills.
These involve 23 units, including those under UP Cooperative Sugar Mills Federation (UPCSMF), for the current crushing season.
The measure is aimed at facilitating UPCSMF, which required working captial, including money, for the payment of cane dues, an official spokesman said.
“The State Cabinet, in its meeting chaired by Chief Minister Mayawati, passed a proposal to relax provisions of government guarantee and fee on cash credit limit (for UP Cooperative sugar mills),” the spokesman said here.
According to the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (Nabard) guidelines, government guarantee is necessary for the cash-credit limits being sought from banks and other financial institutions by sugar mills having negative net-worth.
For the past few years, the government had been providing guarantee for UPCSMF units and loan was granted only after mills mortgaged their sugar stock, the spokesman said.
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“However, there had neither been any default in the repayment of loans, nor was the government guarantee ever evoked,” he said.
23 units in the cooperative sector need working capital to operate mills during the current crushing season, the spokesman said.
“Sugar produced by the mills is sold over a period of 12-15 months, under the monthly release orders against free-levy and levy quota,” he said.
The banks provided the cash-credit limit through pledging of sugar by mills, for the payment of cane dues and other operating expenses, he added.