Soft Loan To Sugar Mills

In a circular dated the 1st March 2019, the Ministry of Consumer Affairs, Food & Public Distribution, announced the provision of soft loans worth INR 7900-10,540 crore to sugar mills. The move seeks to improve the liquidity position of sugar mills and notably, ensures that the cane due arrears of farmers is cleared. For this purpose, the Government will bear the interest subvention cost @ 7 – 10% to the tune of up to INR 533 crore to INR 1054 crore for one year. The announcement comes amidst the backdrop of an increase (above INR 20,000 crore) in sugarcane arrears to farmers in the previous marketing year.

Responsibilities of Banks

For speedy remittance of dues to the farmers, the Government has necessitated the banks to gather information on the list of farmers, their bank account details and the total dues indebted to them from the sugar mills. The Government would then remit the dues to the accounts of the farmers on behalf of the sugar mills. Subsequent balances, if any, would be credited into the bank account of the mill.

Clearance of Outstanding Dues

For incentivizing the mills to clear their dues, the CCEA (Cabinet Committee on Economic Affairs) has sought the provision of approved soft loans to units which have already cleared at least 25% of its outstanding dues in the sugar season of 2018-19.

Other Relevant Initiatives

Besides the provisions mentioned above, the Government, in the recent past, has adopted certain measures to bail out sugar mills and cane farmers, which includes:

Doubling of import duty on sugar to 100%.
The scrapping of export duty.
Provision of soft loans of up to INR 4,440 crore to mills for creating ethanol capacity, and for this purpose, the Government bears an interest subvention of INR 1,332 crore.
Extension of assistance worth INR INR 13.88 (previously 5.50) per quintal of cane crushed, costing the Government an exchequer of INR 4,100 crores.
Allocation of INR 1,200 crores for the creation of 30 lakh tonnes of buffer stock of sugar.
Extension of assistance of INR 1,375 crore to mills by compensating expenditure towards internal transport, freight, handling and other charges so as to facilitate 50 lakh tonnes of buffer stocks of sugar.
Fixing the minimum selling price of white sugar to INR 29 per kg.
Allocating mill wise Minimum Indicative Export Quota (MIEQ) of 20 LMT.

Recent Amendments

As a part of this initiative, the following recent amendments have been put in place by the Government to improve the liquidity of sugar mills and thereby clear the cane dues of farmers:

The minimum selling price of white sugar has seen an increase - from INR 29 per kg to INR 31 per kg.
The allocated mill wise Minimum Indicative Export Quota (MIEQ) has been increased - to 50 LMT from the previous allocation of 20 LMT.
The assistance for sugar mills, as already stated, has been enhanced - to INR 13.88 quintal per sugar season from an earlier allocation of INR 5.50.
Provision of assistance for defraying expenditure towards internal transport, freight, handling and other charges to facilitate sugar exports.

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Frequently Asked Questions

Common questions about Soft Loans to Sugar Mills.

The soft loan scheme aims to improve the liquidity position of sugar mills and ensure that the cane dues owed to farmers are cleared. By providing interest subvention on loans to sugar mills, the government aims to help mills pay off their outstanding dues to sugarcane farmers.

The government will bear the interest subvention cost ranging from 7% to 10% on the soft loans, amounting to INR 533 crore to INR 1,054 crore for one year.

To avail the soft loans, sugar mills must have already cleared at least 25% of their outstanding dues to sugarcane farmers in the 2018-19 sugar season.

Banks are required to gather information on the list of farmers, their bank account details, and the total dues owed to them by the sugar mills. The government will then remit the dues directly to the farmers' accounts on behalf of the mills.

The government has doubled the import duty on sugar to 100%, scrapped the export duty, provided soft loans for setting up ethanol capacity, increased assistance per quintal of cane crushed, allocated funds for creating buffer stocks, fixed the minimum selling price of sugar, and allocated minimum indicative export quotas.

The minimum selling price of white sugar has been increased from INR 29 per kg to INR 31 per kg, the minimum indicative export quota has been increased to 50 LMT from 20 LMT, and the assistance per quintal of cane crushed has been enhanced from INR 5.50 to INR 13.88.

The government is providing assistance to improve the liquidity position of sugar mills, which will enable them to clear the outstanding cane dues owed to sugarcane farmers. The aim is to support both the sugar industry and the farmers who supply the raw material.

The soft loan scheme benefits sugarcane farmers by ensuring that the sugar mills have the necessary funds to clear the cane dues owed to them. By improving the liquidity of mills, the government aims to facilitate timely payment of dues to farmers.

The minimum selling price of sugar aims to provide a reasonable price to sugar mills, thereby improving their financial viability and ability to pay cane dues to farmers. The increase in the minimum selling price is expected to benefit both mills and farmers.

The government has announced assistance to sugar mills to defray the expenditure towards internal transport, freight, handling, and other charges related to facilitating sugar exports. This is expected to support the mills in exporting their surplus sugar and improve their overall financial situation.