Govt rolls out loan sops for 270 co-op sugar mills

The government today announced a package of assistance to facilitate rescheduling repayment and reduction in interest rates on loans taken by cooperative sugar mills. It will cost the government about Rs 525 crore in terms of interest subsidy payment over two years.

Announcing this today, food and agriculture minister Sharad Pawar said about 270 cooperative sugar mills were likely to benefit from this move which would involve rescheduling of loans worth about Rs 2,500 crore.

The interest charged on term loans taken by the mills would be reduced to 10 per cent (from the present rates varying from 11 to 15 per cent) and the repayment would be rescheduled over five to 15 years, with a moratorium of two years for payment of interest as well as principal.

The package amounted to fulfillment of the announcement made in the 2005-06 Union budget speech of finance minister P Chidambaram.

It was prepared by the National Bank for Agriculture and Rural Development (Nabard) based on the recommendation of the Tuteja committee report. It would apply to cooperative sugar mills which were in operation in 2002-03 and had term loans outstanding on March 31, 2005.

Under the package, sugar mills would be divided into two categories. Category A would have mills which could repay the term loan within five years, including the two-year moratorium. The category B would have those mills which could repay the loans in 15 years.

The Centre would provide interest subvention on the restructure loan. This amount, estimated at about Rs 525 for the first two years, would be disbursed to banks as interest subsidy through Nabard. "This will provide liquidity support to the banks for the two-year moratorium," Pawar said.

Justifying the need for the financial assistance, the minister said the sugar factories were facing financial stress because of low production and low capacity utilisation in 2003 and 2004 sugar seasons. This had eroded their capacity to pay cane price arrears to the sugarcane growers.

Nabard, which was asked to work out the detailed package, had analysed the performance of about 170 mills and gave its report in August last.

The final decision on the package was taken at the meeting of Pawar and Chidambaram with Prime minister Manmohan Singh on September 6.Cooperative mills to be covered under the package were located mainly in the four states of Maharashtra, Karnataka, Tamil Nadu and Andhra Pradesh. Maharashtra accounted for the maximum number of beneficiaries.

Pawar ruled out any problem in meeting the sugar demand. The area planted under sugarcane had expanded this year to over 41 million hectare, against last year's 37.5 million hectare, and the total production in the next crushing season beginning October next was likely to be over 18 million tonnes.

This coupled with the carry-over stock of four million tonne would be sufficient to meet the country's sugar needs, he maintained.