Banks give over Rs 4,000 cr interest-free loans to sugar mills

In December, the CCEA had approved Rs 6,600 crore interest-free loans to the sugar industry

Banks have so far disbursed over Rs 4,000 crore interest-free loans of the total Rs 6,600 crore approved by the government to cash-starved sugar mills for clearing dues to cane farmers.

In December, the Cabinet Committee on Economic Affairs (CCEA) had approved Rs 6,600 crore interest-free loans to the sugar industry exclusively for clearing sugarcane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.

"As on June 3, banks have disbursed Rs 4,072 crore interest-free loans to sugar mills," a senior Food Ministry official told PTI.

Of which, Rs 1,412 crore and 1,461 crore have been disbursed to mills located in Maharashtra and Uttar Pradesh, the country's top-two sugar producing states, he said.

Banks have been given June-end as deadline for sanctioning the entire loan amount. The total interest burden, estimated at Rs 2,750 crore over the next five years, is being borne by the government.

Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years.

The Rs 80,000-crore sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.

Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh.

Amid concerns over rising cane arrears, the Food Ministry is also examining providing additional interest-free loans of Rs 4,400 crore to sugar mills to clear dues to cane farmers.

It is also looking at hiking sugar import duty from 15% to 40% to curb cheap imports and increase ethanol blending in petrol to 10% as an effort to improve the liquidity of mills.