The central government has approved to give interest free soft loan of Rs 6,600 crore to the sugar industry in the country. Of this, the sugar mills in Maharashtra are likely to get Rs 2500 crore. There will be moratorium of two years on loan repayment. After the moratorium the sugar mills will have to repay the loan in three years. The central government will pay the interest from the excise duty paid by the sugar mills.

The Maharashtra State Co-operative (MSC) Bank, the apex cooperative bank in the state, gives loans to sugar mills on pledge of the sugar produced. The bank does the valuation of the sugar prices and gives 85% of this value as the loan. 

When the season started, the valuation of sugar was Rs 2,600/ quintal. Based on this the bank gave loan of Rs 2,280/quintal, of which Rs 1,530/quintal were for cane payment. Now, as the sugar price has declined to Rs 2,400/ quintal, the money available from the bank for cane payment is only Rs 1,410/quintal. The fair and remunerative price (FRP) of many sugar mills is above Rs 2,000/quintal. 

Sugar commissioner Vijay Singhal said, “We had a meeting to take review of the loan disbursal process and speed it up.” 

As the crushing season is in its second half, the cane payment issue has become more difficult for the mills. Usually, payment of the farmers, whose cane is delivered towards the end of the crushing season, gets delayed as no bank loan is available after the mills stop operating. Pandurang Patil, managing director of 

Sangli-based Rajarambapu Patil sugar co-operative said, “We are facing problem of short margin. We have stopped all other payments to pay the cane price.” 

The banks have so far received loan proposals from 85 co-operative mills and 16 private mills. Those mills, which are operational in the current year, will be eligible to get the soft loan based on the excise duty paid by them in the last three years. 

Pramod Karnad, managing director, MSC Bank said, “The proposals received so far are under our scrutiny. We hope that the process of loan disbursal may begin by the end of this month.” Government sources accept that many mills have not been able to make cane payment as per the FRP. “Knowing the sugar prices in the market, we are going soft on taking action against the sugar mills for not making FRP payments on time. We have just given notices to some mills,” said an official on condition of anonymity.