The Cabinet will likely discuss on Thursday a proposal to offer interest-free loans worth Rs 7,200 crore to the cash-strapped sugar industry to help it clear cane dues, as recommended by an informal group of ministers, sources said on Wednesday.
After a meeting of the panel, headed by agriculture minister Sharad Pawar on Wednesday, food minister KV Thomas, however, said his ministry will seek the Cabinet’s approval for the proposal at the earliest, without giving any time frame.
Sources said while the proposal for interest-free loans may be placed before the Cabinet tomorrow, proposals on other measures, including doubling the limit of mandatory ethanol blending with petrol to 10% and tightening import norms, may be moved separately later.
On a per quintal basis, mills in Uttar Pradesh, which have been hit most due to elevated price of cane, may gain R2.25 per quintal if provided interest-free loans. However, there will still be a huge gap between the realistic price of R225 per quintal of cane and R280 fixed by UP, even factoring in incentives worth R11.03 per quintal declared by the state recently.
Earlier this month, the panel had suggested measures to end the liquidity crunch faced by sugar mills, which had expressed their inability to clear cane arrears due to an unprecedented crisis stoked by a drastic mismatch between prices of sugar and cane. Mills have to pay as much as R3,200 crore in cane arrears, with Uttar Pradesh alone accounting for roughly 75%.
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 the 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 the RBI norms and incentives be provided to produce 4 million tonne of raw sugar and set up a buffer stock of the sweetener.
Last week, Thomas had asked the industry to diversify its product base to reduce the 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 procurement, 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 had said that Karnataka has already set up a board to recommend cane prices while Uttar Pradesh has recently formed a panel to do so, and the Maharashtra government is also planning to set up a committee of this sort.