Sugar industry to get Rs 6,600 cr interest-free loan

The cash-strapped sugar industry on Thursday got a breather with the Centre deciding to provide interest free loans to the tune of Rs 6,600 crore but with a condition that the monies would be used to make outstanding payments to sugarcane farmers.

The Cabinet Committee on Economic Affairs, at a meeting chaired by Prime Minister Manmohan Singh, approved the recommendation of an informal group of ministers to bailout the sugar sector.

The Centre will bear the entire interest burden – estimated at around Rs 2,750 crore – on the Rs 6,600 crore loans to the sugar industry. The interest subvention of 12 per cent would be serviced entirely through the Sugar Development Fund as against the seven per cent proposed by the GoM. As per the original proposal, the Centre was to pick up five per cent interest tab, which did not find favour with the CCEA.

The loans, which will be provided by banks to sugar mills exclusively for making payments to sugarcane farmers, including arrears, are equivalent to the excise duty paid by the mills in the past three years.

Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years.

The Rs 80,000 crore sugar sector has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.

The CCEA also extended sugar exports without quantitative restrictions for the year that started in October 2013 in view of the surplus availability of sugar in the domestic market.
This is expected to give a positive signal to exporters and the international community on the efforts of the Centre to pursue a stable, long term and consistent export policy regime in the agriculture sector, an official release said.