Interest-free loans likely for sugar industry

The cash-crunched sugar industry is likely to get an interest-free loan against the excise duty paid by them in the 2006-07 (October-September) season and the duty payable in the 2007-08 season, beginning October.

Sugar millers pay a fixed excise duty of Rs 85 per quintal. The Group of Ministers (GoM) on sugar, in its meeting last Wednesday, had recommended providing soft loans to mills against the excise duty paid in the current season and duty payable in the next season. The money, thus made available, was to be used only for the payment of cane prices to farmers.

However, in a meeting with the industry representatives on Saturday, Union Food and Agriculture Minister Sharad Pawar had assured that the loan against excise payments would be interest-free, said industry sources. The recommendation is awaiting cabinet approval.

The decision to make the loan interest-free was taken after the industry voiced its concern over a soft loan meant solely for cane price payment. "While we don't pay any interest on cane arrears, the provision of a soft loan only for cane price payment will effectively mean payment of interest for cane price payment. Most mills would have avoided taking such a loan," said industry sources.

The sugar industry is facing its worst crisis where mills are not even able to recover the cost of raw material. This year's production, at 28 million tonnes, is 45 per cent higher than last year's 19.2 million tonnes.

Uniform cane prices

Meanwhile, the industry is planning to launch a media campaign, advocating for a national cane price that will help it in minimising its losses.

"The campaign, at an estimated cost of about Rs 2 crore, will be launched in another week in the cane growing states of Uttar Pradesh, Karnataka and Tamil Nadu. If cane prices continue to be higher in the next season, most sugar mills, especially in states, where the state government fixes a cane price higher than the central government's statutory minimum price (SMP), will turn sick", said an industry source.

The campaign is mainly targeted at Uttar Pradesh, the second largest sugar producing state, where most private mills are based and which has a state advised price (SAP) of cane.

The SAP is higher by about Rs 40 a quintal compared with the SMP. This resulted in all the sugar mills in the state reporting heavy losses in 2006-07 (October-September) sugar season.