The beleaguered sugar industry got a respite from the Centre with a ₹6,000-crore interest-free loan package ostensibly to help mills clear dues owed to sugarcane farmers that currently stands at ₹21,000 crore.
Sugar stocks rallied on the BSE (see box).The BJP-led government appears to have followed the UPA regime’s package of extending interest-free loans up to ₹6,600 crore given last February.
The decision, taken by the Cabinet Committee on Economic Affairs (CCEA) here on Wednesday, is likely to cost the government ₹600 crore, which will be borne by the Sugar Development Fund.
“There has been excess sugar production in the country which has put pressure on domestic prices. The government has sanctioned this loan for farmers. Mills will prepare a list of beneficiaries and the amount will be transferred directly by banks into farmers’ Jan Dhan accounts,” said Nitin Gadkari, Union Transport Minister. “The CCEA has provided a one-year moratorium on the loan and will bear the interest subvention,” he said, adding that the loans will be provided only to mills which had cleared at least 50 per cent of the outstanding arrears before June 30.
Industry not satisfied According to an official from the Indian Sugar Mills Association (ISMA), the move does little to address the basic issues of depressed prices and surplus sugar. The decision to bear the loan interest for just one year compared to five earlier meant expecting the industry to make profits of ₹6,000 crore in a year’s time which, according to Abinash Verma, Director-General, ISMA, seemed unlikely.
With a 10 million tonne surplus likely at the end of this season, ex-mill prices are ₹10 below the production cost of ₹32-33/kg. “The debt burden of the industry has tripled to ₹36,601 crore in 2012-13 fiscal from ₹11,443 crore in 2007-08. With the increase, 20-25 per cent of the sugar mills may not be able to start crushing operations in the 2015-16 marketing year,” said Verma.
Mills in UP owe the bulk of the arrears, at ₹6,700 crore. “Who will be able to pay back the loan at the end of the year? The conditions, particularly the 50 per cent arrears payment clause, is something very few mills will be able to match,” said an industry source.
Move sweetens sugar stocks
Sugar stocks gained across the board on the bourses on Wednesday after the Cabinet Committee on Economic Affairs (CCEA) cleared a proposal to provide soft loans worth ₹6,000 crore to the industry.
Major gainers include Bajaj Hindusthan (10.05 per cent), Renuka Sugars (7.61 per cent), Balrampur Chini (2.69 per cent and Dhampur Sugar (4.5 per cent).
Other notable gainers include EID Parry (5.88 per cent), Sakthi Sugars (12.66 per cent) and ThiruArooran Sugars (9.67 per cent).