New Delhi, December 6 An informal group of ministers, headed by Agriculture Minister Sharad Pawar, today recommended a slew of incentives to the sugar industry, including 12% interest subsidy on Rs 7,200 crore loan that mills can avail of from banks for paying cane farmers. The panel also recommended loan recasting for mills as per RBI norms, incentives for production of raw sugar up to 4 million tonnes and setting up of buffer stock besides doubling ethanol-blending in petrol to 10%. India traditionally produces white sugar, but there are fewer buyers for it in the world market. Raw sugar can be sold easily in the world market. But the panel ruled out an immediate hike in sugar import duty.
Announcing the bailout package, Pawar said banks would provide Rs 7,200 crore loan to sugar mills at 12% interest to sugar mills with a condition that the money would be used for paying cane farmers. “Total interest subvention will be 12%. Out of this, 7% will be (paid) from the Sugar Development Fund, while 5% will come from the Government of India,” he told the media after the meeting.
Mills would have to repay loans in five years, but could get a moratorium on repayment in the first two years, he said. The final call on these measures would be taken by the Cabinet in the next two weeks.
Finance Minister P. Chidambaram, Petroleum Minister Veerappa Moily, Food Minister KV Thomas and Civil Aviation Minister Ajit Singh were present in the meeting.
Chief Ministers of Uttar Pradesh, Maharashtra and Karnataka were also present. Tamil Nadu was represented by the state Chief Secretary Sheela Balakrishnan.
The sugar industry is facing a financial crisis due to higher cost of production and falling sugar prices that have led to cane arrears of Rs 3,400 crore from 2012-13 marketing year that ended in September 2013.
Sources say being an election year the government was particularly keen to resolve the impasse as early as possible.
Indian Sugar Mills Association (ISMA) Director-General Abinash Verma said: "The industry welcomes the initiatives of the Central Government to help the sugar industry to face the financial crisis it is going through. It will help the industry clear arrears of farmers."
He also said it would help the industry to venture into production of a new product - raw sugar - to diversify its product mix and grab opportunities whenever they are available. “But for a long-term solution, the revenue sharing formula for cane pricing should be implemented to rationalise the cane pricing mechanism and make it more transparent,” he added.
The bailout plan