Free Press Journal

CCEA okays interest-free loan to sugar mills to clear cane arrears


sugar industry body ISMA said the govt’s decision would not be productive as it would not address the problems of
surplus stock and low sugar prices 

NEW DELHI : To help distressed sugar farmers over non-payment of their cane dues that have touched about Rs 21,000 crore, the Cabinet Committee on Economic Affairs on Wednesday offered a soft loan of Rs 6,000 crore to sugar mills, but with a rider that they must clear at least 50 per cent of their outstanding arrears before June 30 to get the benefit.

The mills will also get a year’s moratorium on this loan as the government will bear the interest subvention cost of Rs 600 crore.

To ensure the money so released goes to the farmers, the CCEA decided that the sugar mills will give the list of farmers and their outstanding dues to the banks to enable them to directly pay the money in the farmers” account on behalf of the mills.

The loan offered is too little as compared to the cane price arrears for the current sugar year (October 2014-September 2015) piling up to Rs 21,000 crore, but the decision casts the responsibility on the sugar industry bodies to persuade its members to pay off half the dues of the farmers to take advantage. “If the sugar mills clear half of these dues to the tune of Rs 10,500 crore to take advantage of soft loan, the disbursal of Rs 6,000 crore as loan will bring down arrears to just Rs 4,500 crore,” Food and Consumer Affairs Minister Ramvilas Paswan said.

However, sugar industry body ISMA said the government’s decision would not be productive as it would not addresses the problems of surplus stock and low prices of the sweetener.

Rather, Indian Sugar Mills Association (ISMA) Director General Abinash Verma said the Centre should give loans to state-owned agencies to buy 2.5-3 million tonnes of sugar from the industry.


They said the new ethanol prices fixed by the government, dismantling the tender-based price discovery, also incentivised the sugar mills to earn Rs 42 per litre, an increase of Rs 10 per litre over the last year.

The government is also waiving the excise duties on ethanol in the next sugar season that starts in October 2015 to further incentivise ethanol supplies for blending with petrol. This would further increase the ex-mill price of ethanol and help improve liquidity of the industry to clear the cane price arrears, the officials said.

They said the government has taken several steps in the last one year to mitigate the situation and protect the livelihood of cane farmers and these include hike in import duty from 25 to 40 per cent on April 29, abolition of the duty free import authorisation scheme, and cutting down the export obligation from 18 to 6 months under the advanced authorisation scheme.