Finance Ministry considering debt restructuring for sugar sector

The Union finance ministry is considering a proposal to restructure sugar mills’ debt, which is under severe stress due to lack of capacity utilisation. While sugar crushing begun two months ago, some mills in Maharashtra and Karnataka don’t have enough sugarcane to crush and are said to be closing operations. The sugar sector’s total debt is estimated at Rs 50,000 crore.

In a meeting with sugar sector representatives on Tuesday, Finance Minister Arun Jaitley stressed the need for debt restructuring. T Sarita Reddy, president of Indian Sugar Mills Association (Isma), told Business Standard: “The FM gave us a patient hearing. He sounded positive. The FM said that the key issue is debt restructuring. He marked a copy to the finance department to take it forward.”

Isma requested the government to restructure sugar mills’ debt under a scheme similar to S4A, which is for major industries having exposure of Rs 500 crore and above. “As most sugar mills individually will not have exposure of Rs 500 crore, we request to modify the scheme specifically suitable for the sugar industry by modifying the exposure to Rs 100 crore and taking internal cash accruals of one year period as the basis since sugar is a seasonal business”, it added.

Sugar prices have started rising but the industry is unable to make money because capacities are not fully utilised owing to lower availability of cane. In the meeting with the finance minister, the issue of lower production was also discussed. Isma’s estimate for October-September 2016-17 sugar season is 23.4 million tonnes (mt) against the government's 22.5 mt. Last year, sugar production was 25.2 mt. Among the other demands of Isma is keeping the industry under the lowest goods and service slab, which could be 5%.