Cabinet may mull Rs 7,200 cr loans to sugar mills tomorrow

Sharad Pawar says some incentives to industry will be considered this week, others next week

The Cabinet is likely to consider tomorrow a proposal on providing interest-free loans of Rs 7,200 crore to the cash-starved sugar industry for making sugarcane payment to farmers.      

"Incentives to the sugar industry will be announced in two stages. Some will be considered this week, others will be taken up in the next week," Agriculture Minister Sharad Pawar told reporters here.      

A source said the Food Ministry's proposal on giving Rs 7,200 crore interest-free loans to the beleaguered sugar industry, as suggested by the informal group of ministers headed by Pawar, is expected to come before the Cabinet for discussion tomorrow itself.     

The source also said that the Ministry would move a separate Cabinet note for other incentives as suggested by the PM-constituted ministerial panel.      

In the Cabinet note, the Food Ministry has proposed that loans worth Rs 7,200 crore would be provided by banks to sugar mills exclusively for sugarcane payment.      

Banks will 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 Sugar Development Fund. Mills would have to repay the loans in five years and can avail of a moratorium on repayment in the first two years.      

The ministerial panel today met again to examine additional sops for millers to help improve their working capital amidst concerns that farmers are awaiting clearance of their cane dues, that too at a time when general elections are only months away.      

Thomas said: "In the GoM, we discussed about other incentives, especially reducing the period for re-export of imported sugar from the existing 18 months. We heard views from the industry. No decision has been taken."      

Besides Pawar and Thomas, Finance Minister P Chidambaram, Petroleum Minister Veerappa Moily and Civil Aviation Minister Ajit Singh were present at the meeting.      

The representatives from Indian Sugar Mills Association, National Federation of Cooperative Sugar Factories Ltd, and top officials of Shree Renuka Sugars, EID Parry's and Simbhaoli Sugars were also present in the meeting.      

The government is considering providing relief measures to address the cash crunch facing sugar mills and their inability to pay higher cane prices this season. Mills have cane arrear of Rs 3,400 crore.      

Besides interest-free loans, the ministerial panel had recommended recasting of loans taken by mills as per Reserve Bank norms, incentives to produce 4 million tonne of raw sugar and setting up of buffer stock, besides doubling ethanol-blending in petrol to 10 per cent.      

The sugar industry is facing financial problems due to higher cost of production and lower sugar prices in the wake of surplus production in the last few years.