Centre approves Rs 6,000 crore soft loans to sugar mills

The Centre on Wednesday eased norms for sugar mills to borrow soft loans of Rs 6,000 crore to help clear arrears of Rs 15,400 crore to sugar cane growers.

A decision, in this regard, was taken at the meeting of the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi.

To infuse liquidity into the sugar industry and facilitate clearing of huge cane dues, the government had in June approved Rs 6,000 crore soft loan for the 2015-16 season (October-September) to expedite payment of arrears.

The loans were given to those units that had cleared at least 50 per cent of their outstanding arrears by June 30.

“As a result of the above interventions, the cane price arrears are steadily reducing and presently stand at Rs 15,400 crore. To further liquidation of arrears and increase coverage of the soft loan scheme, the government has decided to extend the date of achieving eligibility under the soft loan scheme from June 30, 2015 to August 31, 2015,” the government source said.

Now, mills that have cleared 50 per cent of their outstanding dues by August 31 would be eligible for the loan, it said. and added that this will extend benefits to larger number
of farmers by enabling more mills to avail the benefits of the scheme.

It has also been decided that after clearing cane dues of farmers, subsequent balance, if any, will be credited into the mill accounts, it added.

“This will benefit about 150 additional sugar mills which had proactively liquidated more than 90 per cent of their cane dues payable. This would ensure that mills are incentivized for arranging bridge finances for timely clearance of cane dues to farmers,” the source added.

The government has provided one year moratorium on the soft loan, and will bear the interest subvention cost to the extent of Rs 600 crore for the said period.

The sugar industry is unable to clear cane arrears as it is facing severe liquidity crunch on account of surplus production that has resulted in low prices of sugar in domestic markets.

The Centre has taken several steps to mitigate the situation by infusing liquidity into the sector.