Cabinet approves Rs 6,600-cr interest-free loans for sugar mills

The Cabinet Committee on Economic Affairs on Thursday approved Rs 6,600 crore interest free loans to the beleaguered sugar mills to ease their cane payment burden, said Food Minister K.V. Thomas.

The CCEA also approved the exports of sugar without any quantitative restrictions, said Information and Broadcasting Minister Manish Tewari. The Government will soon notify the sugar package.

Interest free loans were one of the relief measures suggested by the informal group of ministers led by Agriculture Minister Sharad Pawar to help millers clear dues and make timely payment in the current crushing season 2013-14. The Government had asked the panel headed by Pawar to look into the issue following the millers’ reluctance to start crushing for the 2013-14 season starting October.

Sugar millers, who are reeling under the impact of high cane costs amidst a bearish trend in sweetener prices, are currently saddled with the payment arrears for last season estimated at Rs 3,400 crore, while dues for the current season have started building up with the pick up in cane crushing.

As part of the relief scheme, bankers were likely to lend equivalent to the excise duty paid by mills in the last three years, while the entire interest of 12 per cent would be borne by the Centre and the Sugar Development Fund.

The Pawar-led panel had also recommended recasting of loans taken by mills as per the Reserve Bank of India norms, incentivise production of 4 million tonnes of raw sugar and create buffer stocks besides doubling ethanol blending in petrol to 10 per cent. These other measures were likely to be considered by the Cabinet next week. Pawar had told Wednesday that the relief measures would be announced in stages.

“The loans will help the industry reduce around Rs 500 crore annually of interest burden in the next 5 years. The industry eagerly waits for the Government’s help to reduce some of the surplus sugar stock as well as take immediate steps to rationalise cane pricing policy. Those can further help the sugar sector come out of the current financial crisis,” said Abinash Verma, Director General of the Indian Sugar Mills Association in a statement.

Cane crushing has picked up with 426 of the 500-odd mills have started crushing across the country as on December 15. However, the production of the sweetener is down by 50 per cent at 24.24 lakh tonnes as on December 15 over corresponding last year.

The industry has started the 2013-14 season with carry forward stocks of 8.8 million tonnes and the production this year is expected to be 25 million tonnes more than the domestic demand of 23 million tonnes.

The CCEA deferred the issue relating to increasing buffer stocks. A panel including Finance Minister, Agriculture Minister and Planning Commission will look at the issue, said Thomas.