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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.