The government is mulling a proposal to raise the interest rate subsidy on loans against excise duty paid by sugar mills during the last and current financial years, a senior government official said today. | |
| The official said the proposal might come up for discussion at the next meeting of the Cabinet Committee of Economic Affairs, which is likely to be held on Thursday. |
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| Last month, the government decided to allow mills to access loans from banks against excise duty to help them clear cane dues. |
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| It also agreed to pay a 5 per cent interest subsidy on the loans, bringing down the actual interest rate to 7-8 per cent, considering a prime lending rate of 12-13 per cent. The sugar directorate, however, has been asking the finance ministry to increase the interest rate subsidy to help sugar mills. |
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| The official said the sugar directorate had earlier recommended allowing mills to defer the payment of excise collected for two years, which would have acted as an interest free loan for the period. |
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| "Since the finance ministry did accept the proposal, it should have allowed interest-free loans to sugar mills," the official said. |
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| "But even this proposal has not found favour, so we have asked for an increase in interest rate subsidy. The decision will now be taken by the cabinet panel," he said. |
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| The finance ministry is of the view that since farmers get short-term credit at 7 per cent, it would not be prudent to allow sugar mills to access loans below 7 per cent. |
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| According to sugar directorate estimates, sugar mills are likely to seek a loan of Rs 3,600 crore with full interest subvention at 12 per cent pegged at Rs 1,278 crore for a two-year period. |
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| Dec sugar quota set at 1.3 mn tn |
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| The Centre has allocated 1.3 million tonnes sugar for open market sale in December as against 1.2 milion tonnes a year ago, a government official said today. The open market quota allocated for December is the same as that for November. |
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| In November, however, the government had also allowed mills to sell 91,808.5 tonnes unsold levy sugar in the open market in addition to November open market allocation. |
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| The government has also allocated 182,000 tonnes levy sugar for sale in December under the public distribution scheme, up from 167,000 tonnes a year ago. |
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