Govt okays Rs 567 crore rate subsidy for co-op sugar mills

The government has approved an interest subsidy of Rs 567 crore for loss-making cooperative sugar mills via the National Bank of Agriculture and Rural Development (Nabard) to enable them to clear dues, said Finance Minister P Chidambaram.

"I had announced that Nabard will introduce financial package for loans by mills in my Budget speech earlier this year ... and orders towards this were issued on 19 December, 2005," Chidambaram said at the annual general meeting of the Indian Sugar Mills Association today.

He also said that loans for restructuring would now be also made available to private sugar mills under the corporate debt restructuring (CDR) mechanism.

"As per my knowledge, 16 private sugar mills had applied for restructuring loans and all the funds have been cleared by public sector banks. There is nothing pending with them," he said.

Chidambaram called for the sugar sector to increase ethanol output to help cut the rising costs of vehicular fuels.

"It is a bio-fuel and less polluting. We can bring down our energy costs like Brazil if we produce more of it. Ethanol can also directly produced from cane using its root and I would ask the sugar sector to focus not only on ethanol but also in power generation," he said.

On the issue of power generation, FM said power generation by sugar mills can be used by states to reduce their power deficit. "India is a power-deficient country and we must make use of captive power generation."

Currently, the sugar sector produces about 4,000 megawatts of power out of which it uses 3,300 MW itself and feeds the rest to grid.

"I feel the feed to the grid can be increased tremendously, say by another 5,000 MW, and the sugar sector must work towards it," said Chidambaram.