Indian sugar mills association

Cabinet Committee on Economic Affairs okays Rs 6,000 crore interest-free loan to sugar mills

Date:	11 Jun 2015

Source:	The Economic Times

Reporter:	Our Bureau

News ID:	4409

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The Cabinet Committee on Economic Affairs (CCEA) approved soft loan of Rs 6,000 crore to sugar mills to help them make payments to sugarcane farmers. The loan will not incur any interest for one year.

"Mills that would have cleared more than 50 per cent or 50 per cent of cane dues by June end would be sanctioned interest-free loans. The subsidy burden will be borne by the government for one year and would be funded by the food ministry's sugar development fund," Transport Minister Nitin Gadkari said after the Cabinet meeting on Wednesday.

Gadkari said the government will bear Rs 6,000 crore interest subvention on the loan. Sugar mills currently owe about Rs 21,000 crore to farmers for purchase of cane.

The sugar industry has been demanding that the government create a buffer stock of 2 million tonnes of sugar. It is now asking the Centre to buy about 10 per cent of the total production and hold it as reserve to be released as part of market intervention operations.

Sugar production is expected to touch 28.5 million tonnes in the current marketing season ending September 30, against consumption of about 24 million tonnes, said Gadkari. In 2013-14 (October-September), India produced 24.6 million tonnes of sugar.

Gadkari said the government, including Prime Minister Narendra Modi, is constantly monitoring the sugar sector issues. The government is mulling a long-term plan for the sector, but no decision has so far been taken on creating a sugar buffer stock, he said.

Indian Sugar Mills Association Director General Abinash Verma said the loan approved by the government is unlikely to address the problems the industry faces. "To expect the industry to repay the loan of Rs 6,000 crore in one year is actually expecting the industry to make profits to the tune of Rs 6,000 crore within a year's time, which does not seem to be possible with a surplus of over 10 million tonnes and depressed sugar prices of around Rs 10 per kg below the cost of production," Verma said.

To reduce surplus sugar in the market, the government should buy 2.5-3 million tonnes from the open market via state run agencies instead of extending another loan, he said.

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