Centre to pump Rs 6,600 crore into cash-strapped sugar industry

The Union Government on Thursday approved guidelines for disbursing financial assistance of Rs 6,600 crore to the cash-strapped sugar industry, which has been unable to make payments to cane growers leading to strong resentment among the farming community.

The guidelines, approved by the Cabinet Committee on Economic Affairs (CCEA), clears the way for disbursement of the assistance in the form of interest-free loans to sugar mills, most of them situated in Uttar Pradesh, Maharashtra and Karnataka.
Last week, the CCEA had given in-principle nod to the proposal. The interest burden, estimated at Rs 2,750 crore over a five-year period, will be serviced through the Sugar Development Fund, Food Minister K V Thomas said.

The loan would be disbursed through a separate bank account to ensure the utilisation of money is monitored. The Finance Ministry will issue necessary instructions to banks to operationalise the lending process, including appointment of nodal bank for the purpose, he said.

According to the guidelines, the loans would be provided to sugar mills exclusively for making payments to sugarcane farmers, including arrears. The loans would be equivalent to the excise duty, cess and surcharge on sugar paid by the mills in the past three years.

Mills have to repay the loans in five years and may avail of a moratorium on repayment for the first two years. “No interest subvention (is) to be provided for the period of default in the principal repayments,” an official statement said.

Loans will be given to sugar mills, which have been functional during the 2013-14 season (October-September).

Sugar mills with loans classified as Non Performing Assets (NPA) by the banks will be eligible for the credit provided the state governments concerned provide guarantee for their new loans.

All loans which are sanctioned by June 30, 2014 and disbursed by September 30, 2014 by the lending banks, would also be covered under interest subvention facility, the Minister said.

The lending will be subject to various norms relating to scrutiny, future cash flows of five years, establishing the viability and debt servicing capacity and conduct of loan, including the restructuring guidelines as notified by RBI for sugar industry from time to time.