"The Rs 6,000 crore loan announced by the government for the sugar industry, with a one year moratorium, will be unproductive. This will not address the basic problem of surplus sugar and depressed sugar prices," Indian Sugar Mills Association (ISMA) Director General Abinash Verma said.
He said the cane price arrears to farmers would come down by Rs 6,000 crore from the existing about Rs 21,000 crore, but still a huge amount would remain unpaid.
"Decision of the Government to bear the interest on the loan for just one year as compared to five years in the previous scheme announced in February 2014, is actually not an interest free loan in true sense," He added.
Verma felt that it would be impossible for the industry to earn Rs 6,000 crore in a year for repaying this loan.
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"To expect the industry to repay the loan of Rs 6,000 crore after one year is actually expecting the industry to make profits to the tune of Rs 6,000 crore within a year's time, which does not seem to be possible with a surplus of over 10 million tonnes and depressed sugar prices of around Rs 10 per kg below the cost of production," he said.
"This way both the objectives of clearing cane price of farmers as well as reducing the surplus sugar can be solved," Verma said in a statement.
The disbursement of the loan to the government agency will also be faster than giving to individual mills, which will ensure that the farmers get their payments faster.
ISMA demanded that the Government should help reduce surplus sugar stocks held by mills and improve ex-mill sugar prices to ensure that mills are able to start their crushing operations in the next sugar season from October 2015.