Govt notifies scheme to make cooperative sugar mills loan eligible

The scheme which was notified today is expected to directly benefit almost 63 cooperative sugar mills in the country which have distilleries attached with them

In a move to enhance the economic viability of cooperative sugar mills and boost ethanol production, the Centre has notified a scheme allowing them to access subsidised loans for converting existing sugarcane-based ethanol distilleries into dual-feed units.

  The scheme, notified on Friday, is expected to benefit nearly 63 co-operative sugar mills with attached distilleries. It will also further strengthen the ethanol blending program by enabling cooperative sugar factories to produce ethanol from grains and corn, in addition to molasses.

  Until now, the interest subvention scheme for converting single-feed distilleries into multi-feed ones was available only to private sugar companies.

  According to sources, under the scheme, cooperative sugar mills with distillation capacity will now be eligible for a 50 per cent interest subvention on project loans or 6 per cent — whichever is lower — on loans provided by banks or financial institutions. This benefit will be available for five years, including a one-year moratorium.

  “As most cooperative sugar mills secure loans through the National Cooperative Development Corporation (NCDC), which charges an interest of around 8.5 per cent, the actual rate for borrowers after the subvention scheme takes effect would be approximately 4.25 per cent,” said Prakash Naiknavare, managing director, the National Federation of Cooperative Sugar  Factories, in an interview with Business Standard.

  For a loan of ₹200 crore, an interest rate of 4.25 per cent is "excellent," he added.

  "Most sugar mills require around ₹50-60 crore to convert their molasses-based plants into dual-feed ones, and with this attractive interest rate, investments will be smooth," Naiknavare said. The move is also expected to improve the economic viability of distilleries attached to cooperative sugar mills, allowing them to operate for an additional 2-3 months beyond the usual 4-5 month molasses supply window.