Sugar mills are getting this third package since December 2013 as cane arrears in the current season (October 2014-September 2015) have touched Rs 21,0000 crore. The Uttar Pradesh mills alone account for Rs 9,000 crore of the pending amount.
The Cabinet Committee on Economic Affairs (CCEA), chaired by PM Narendra Modi has agreed to provide a one year moratorium on repayment of this loan. The Centre will bear the interest waiver cost to the extent of Rs. 600 crore for the one year period.
“We have taken this decision in the interest of farmers,” Union minister for road transport and highways Nitin Gadkari told media persons after the cabinet meeting.
The government has mandated that banks will obtain from the sugar mills the list of farmers and the dues payable to them so that the arrears are directly transferred to the bank account of growers on behalf of the mills to ensure that farmers are paid their dues without any delay.
If there is any balance amount left after clearing farmers’ dues, then it will be credited into the mills account. This is a departure from the past when the mills were asked to clear farmers’ dues.
The approved soft loans will be provided to sugar mills which clear at least 50 per cent of their outstanding arrears before June 30, 2015.
Glut in the market
Cane arrears built up on account of the difference between the remunerative price of sugarcane fixed by the Centre and the higher state advised price fixed by some of the state governments, official sources said.
Besides, higher production than domestic consumption in the last four years has led to subdued sugar prices. Similar situation prevails in international market. This has stressed the liquidity position of the industry leading to a build up of cane price arrears.
Centre regulates sugar industry
Last year, Centre had taken several steps to resolve the issue, such as raising sugar import duty to 40 per cent from 15, increasing incentives on raw sugar exports, raising mandatory ethanol blending to five per cent from two per cent, and fixing a higher price for ethanol.
The Centre also decided to waive the excise duty on ethanol in the next sugar season to further incentivise ethanol supplies for the blending programme. This will enhance the ex-mill price of ethanol and help improve the liquidity of the industry, sources said.