Subsidised loans for sugarcane farmers

In order to incentivise sugarcane cultivation, the Union food ministry has decided to grant loans to sugarcane farmers at a concessional interest rate of 4 per cent to purchase quality seeds, fertilisers and pesticides, said a government release.

Usually, farm loans are provided at an interest rate of 7 per cent. The loans will be provided by the food ministry from the Sugar Development Fund. The move is expected to benefit sugarcane growers, particularly in Maharashtra and Uttar Pradesh, the country’s two prime sugar producing states. The loans would be disbursed to the sugar factories by December 2009, which in turn, will pass on the loans, in cash or kind, to the cane growers in their area latest by March 2010.

 

The sugar factories would be required to repay the loan along with interest thereof, in four years from the date of disbursement, in four equal annual installments. The amount of loan that a mill would depend on the sugarcane it would have crushed in the last three years.

Sugar mills as well as their association, however, did not see much gains coming out of this scheme. “The procedures are still not clear. Mills have been burdened with the responsibility of disbursing and recovering the loan. The government should have used its banking network and provided loans directly to farmers,” said officials.

Some also said the move had been made eyeing the forthcoming Assembly elections in Maharashtra.

Sugarcane production in 2008-09 fell over 22 per cent to 271 million tonnes (mt). This, coupled with high diversion to gur producers, caused domestic sugar output to touch a three-year low of 15 mt in the current season (October-September) against the consumption of 22 mt. Consequently, prices have been on an uptrend. Most companies are selling sugar at an ex-factory price of Rs 3,000 a quintal.

At the retail level, sugar is selling at a record Rs 34-35 a kg.