Centre plans debt recast for sugar mills by June 30

The government is expected to finalise debt restructuring packages for sugar mills in Andhra Pradesh, Karnataka, Tamil Nadu, Bihar and Maharashtra by June 30.

Finance minister P Chidambaram told reporters after a meeting with bank chiefs that the National Bank for Agricultural and Rural Development (Nabard) is working out debt restructuring packages for 61 mills, while 26 do not require debt restructuring. He said that each mill would require a specialised package.

Nabard is expected to finalise a package with a moratorium of two years on both the principal and interest and a schedule of payment based on the commercial viability of sugar units. This package would be for sugar factories that were operational till 2002-03.

Reserve Bank, of India, the government and financial institutions would assist Nabard in forming the package. Indian Bank's Association (IBA) and Nabard has been asked to work out a scheme under which sugar factories would be able to renegotiate the rate of interests on their existing 'high interest bearing' loans.

The government has already reduced interest rate on loans from the sugar development fund to two per cent below the bank rate. The government is expected to make the same rate applicable to loans outstanding as on October 21, 2004.

The financial package being planned would require compromise from all the stakeholders including the lending bank, central government and the state governments. The issue of restructuring mainly involves co-operative banks,which have financed co-operative sugar mills.

So far, 13 units involving bank finance of Rs 2,197 crore have been restructured under the Corporate Debt Restructuring (CDR) mechanism. The 15-member committee constituted by Nabard in consultation with the Centre has devised a format for collecting uniform data from banks regarding the functioning of co-operative sugar units and their loan status.

The committee has been asked to adopt a macro approach on financial package and work out a broad framework for restructuring the loan accounts keeping adequate flexibility so that individual banks can make specific changes to suit their loan portfolio.