The Government on Thursday approved modalities for providing interest-free loans worth Rs 6,600 crore to the sugar industry for payment of cane price arrears.

The Cabinet Committee on Economic Affairs gave its final approval to the proposal to provide interest subvention for financial assistance to the sugar industry for effecting cane payments.

arrears

Reeling under the impact of high cane costs amidst a prolonged bearish trend in sugar prices, the industry is currently saddled with arrears of around Rs 3,000 crore.

With cane crushing gaining momentum in the current 2013-14 season, the payment dues for the current season have started building up.

Tracking the Cabinet approval, scrips of sugar companies such as Bajaj Hindustan and Shree Renuka Sugars edged up to close higher on Thursday.

The scrip of Bajaj Hindustan gained 2.33 per cent to end at Rs 14.48, while that of Shree Renuka Sugars closed 1.76 per cent higher at Rs 20.25.

Triveni Engineering gained 15.02 per cent to end at Rs 15.85 on the BSE, while Dhampur Sugars ended 1.15 per cent higher at Rs 35.05. Sakti Sugars ended 2.88 per cent higher at Rs 16.05 on the BSE on Thursday.

Under the relief package, the Centre will provide an interest subvention of up to 12 per cent for additional working capital loans to the sugar companies, equivalent to last three seasons excise duty, cess and surcharge on sugar.

The expenditure for the financial package will be fully met from the Sugar Development Fund, an official statement said.

The loans would have a two-year moratorium and would have to be repaid in five years.

The loans would be meant exclusively for the effecting cane price payment by the sugar mills.

Sugar undertakings with loans will be classified as non-performing assets and will also be eligible for the loans, provided the State Governments concerned stand guarantee for the new loans, the statement said.

The industry expects a relief package to reduce the interest burden of around Rs 500 crore annually, over the next five years.