UP sugar biggies won't benefit from Rs 6,000 cr soft loan scheme

Total arrears accumulated by domestic sugar industry is over Rs 20,000 crore

Several big names in the Uttar Pradesh sugar industry are unlikely to benefit from the Rs 6,000 crore soft loan scheme unveiled by the Centre yesterday to help mills settle arrears.

The total arrears accumulated by the domestic sugar industry is over Rs 20,000 crore, of which UP alone accounts for about Rs 9,000 crore.

Under the interest subvention scheme, the Centre would incur interest payment of about Rs 600 crore for first year, while the respective mills would incur interest payment for the remaining four years in addition to the repayment of the loan.

However, the scheme would be applicable only to those mills, which would have settled 50 percent of their arrears by June 30. This parameter would almost certainly bar several UP sugar mills operated by prominent groups viz. Modi, Mawana, Simbhaoli, Rana, Yadu and Uttam from getting soft loan.

Hearing a petition over arrears for 2014-15 crushing season, Allahabad High Court had directed the state mills, including public and private units, to settle 25 percent of their arrears by June 15. This is unlikely to be met since almost Rs 2,400 crore have to be paid by the date.

The HC had ordered the cooperative and government mills to settle their part of cane arrears in the ratio of 25 percent each by June 15, June 30 and July 15 respectively. The next date of hearing in the case is July 28, when the court would decide on the remaining portion of the dues.

Likewise, the private mills were directed to settle 25 percent of dues by June 15 and 75 percent of their dues by July 15.

Meanwhile, the soft loan would not be provided to units which have a 'weak balance sheet', according to a senior sugar industry official.

"The state government would be required to furnish counter guarantee for such mills if they wish to avail of the loan. However, the government has informed that it had already breached its limit set by the Reserve Bank of India (RBI)," he told Business Standard.

A similar scheme was also floated by the Centre last year to help beleaguered mills. The state mills had a quota of about Rs 2,000 crore last year. While loan applications for only Rs 1,650 crore were received, only about Rs 1,500 crore were actually disbursed as interest free loan to UP mills. However, due to these terms, Modi and Mawana group mills could not avail of the scheme.

"The interest free loan scheme does not take into account the loan repayment of mills beyond one year," UP Sugar Mills Association secretary Deepak Guptara lamented.

At the start of season, UP had retained cane price at Rs 280 per quintal, while allowing mills to pay at Rs 240 per quintal upfront and deferring payment of the remaining Rs 40 per quintal to end of season. The state government has also provided some relief to mills.

Meanwhile, the UP crushing season is almost over with sugar output standing at about 7.10 million tonnes (MT) and sugar recovery reaching 9.55 percent compared to 9.27 percent last season.