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A day after the Centre announced it will provide soft loans worth Rs 6,000 crore to sugar mills, ISMA president has said the move will not help the industry.
Indian Sugar Mills Association (ISMA) president A Vellayan said the loans do not address the problem of surplus sugar or depressed sugar prices, which are impacting the industry.
"The 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 the true sense," said Vellayan.
He added that to expect the industry to repay the loan after one year is impractical as it is based on the assumption that the sector will be able to log a profit in a year's time. This, he said, is unlikely given the surplus of over 10 million tonne. Sugar prices too are weak, quoting Rs 10 below the cost of production, he added.
Instead, he said the government should have extended the loan to buyers like FCI, MMTC, STC or APEDA, who could buy 2.5-3 million tonne of surplus sugar from the industry.
"This way, both the objectives of clearing cane price of farmers as well as reducing the surplus sugar could have been solved. Disbursement of the loan to the government agency would also be faster than giving it to individual mills," said Vellayan.
The government should help reduce surplus sugar stocks held by mills and improve ex-mill sugar prices to ensure that the sugar mills are able to start their crushing operations in the next sugar season from October 2015, he added.
