FPJ Exclusive: Sugar mills body to meet NABARD for the availability of credit for ethanol units & restructuring of loans

The Maharashtra Government, the state-run National Bank for Agriculture and Rural Development (NABARD), the Maharashtra State Cooperative Bank and the Federation of Cooperative Sugar Factories will hold a maiden meeting on Thursday to discuss the availability of urgently needed loans by factories to participate in the ensuing crushing season and also for the setting up ethanol plant, restructuring of loan and relaxation in net disposal resources norms for access to the line of credit. The meeting will take place in the presence of former union minister and NCP Chief Sharad Pawar.

The meeting was necessitated as the banks have refused to provide loans to almost 85 of the total 103 sugar cooperative factories whose balance sheets have turned red because of a mismatch between the cost of production (Rs 3,400 per quintal) and the prevailing sugar prices (Rs 3,100 per quintal). These factories each are incurring a cash loss of Rs 300 per quintal. In addition to the higher fair and remunerative prices, their balance sheet is under tremendous pressure.

The banks have been demanding the government guarantee for fresh loans. A fortnight ago the state government has provided a guarantee of over Rs 380 crore towards principal and interest for 32 cooperative sugar factories. It is not enough that the banks are demanding similar guarantees for other factories too.

The Federation MD Sanjay Khatal told Free Press Journal, ‘’ The banks need to take a proactive role in providing funds and restructuring of loans for sugar factories to go in for ethanol production instead of sugar production. In Maharashtra, there is already a carry forward sugar stock of 60lakh and it is expected that 900 lakh sugarcane will be available for crushing to produce a record 90lakh sugar by the end of crushing season for 2020-21. Therefore, in order to limit sugar production by factories, the focus should be given on ethanol production.’’ He said NABARD will be urged to come forward and resolve issues relating to providing loans even to factories with red balance sheets.

The Centre has released the plan for the promotion of ethanol production capacity expansion for the country of which 67 such plants with capital expenditure of Rs 3,400 crore is envisaged in Maharashtra. However, the banks are reluctant to provide loans due to poor financial health. The state government and the Federation of Cooperative Sugar Factories have made a strong case for providing line of credit for equipment and ethanol production by converting C class molasses into B class molasses and also by converting sugarcane syrup into ethanol.

Khatal said the banks need to provide credit based on a tripartite agreement cleared by the Centre and through an escrow mechanism for factories to set up ethanol units.

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Free Press Journal