The Centre has planned a Christmas gift for the beleaguered sugar industry.
The Cabinet will take a final call, before December 25, on a bailout package that includes interest-free loans worth Rs 7,200 crore to clear cane arrears, food minister KV Thomas said on Wednesday.
Last week, an informal group of ministers, headed by agriculture minister Sharad Pawar, suggested measures to remove the liquidity crunch faced by sugar mills, which have expressed their inability to clear arrears due to an unprecedented liquidity crunch stoked by a drastic mismatch between prices of sugar and cane.
Mills have to pay as much as Rs 3,200 crore in cane arrears with UP alone accounting for roughly 75%.
Asked when the government would take a decision on the proposed measures, Thomas said: "Most probably before the Christmas...We are doing it fast. Our department is preparing a note. Before taking it to the Cabinet, we will again discuss it in the meeting of the informal GoM."
According to the proposed relief measures by the panel, banks will lend equivalent to the excise duty paid by mills in the last three years, while a 12% interest burden will be shared by the Centre and the Sugar Development Fund.
Mills will have to repay the loans in five years with a moratorium on repayment in the first two years.
This apart, the panel has recommended doubling the level of ethanol blending with petrol to 10%. It has also suggested that loans taken by mills be recast in accordance with RBI norms and incentives be provided to produce four million tonnes of raw sugar and set up a buffer stock of the sweetener.
Thomas said that export of surplus sugar in the country has become difficult due to the already adequate supplies globally. Thomas said the government is considering a sugar price stabilisation fund to curb the long-term volatility in sugar prices.
Thomas asked the industry to diversify its product base to reduce risk of a price fall in sugar. "For instance, the export market does not want our white sugar. The demand is for raw sugar," he said. Boosting ethanol production is another area worth considering.
On the problems in ethanol procurements, Thomas said the government is trying to settle the issue between sugar mills and oil marketing companies soon.
On adopting a sugar price-sharing formula, as recommended by the Rangarajan committee report, the minister said Karnataka has already set up a board to recommend cane prices while UP has recently formed a panel to do so and Maharashtra government is also planning to set up a committee.
Meanwhile, Indian Sugar Mills Association's outgoing president M Srinivasan expressed concern about the irrational pricing of cane. "If the state governments continue to fix irrationally an unviable sugarcane price, we feel that we will be forced out of this business very soon," he said.