Sugar mills in Maharashtra are not showing much interest in interest-free loan from the Centre. Bankers say that mills seem to be more in favour of short-term pre-seasonal loans.

According to officials and experts, the reason is that there is still no clarity on the interest subvention for the remaining period of four years, although the Maharashtra government has announced that the state would take care of the interest for the remaining period.

Around Rs 900 crore is what the cooperative banks, including Maharashtra State Cooperative Bank ( MSCB), will be disbursing for the coming season that begins in the next three months.

According to Pramod Karnad, MD, MSCB, mills have begun submitting documents for pre-seasonal loans and the quantum of loans disbursed by his bank comes up to R450 crore. “Mills, however, are yet to submit necessary documents for the interest-free loans. The operational guidelines from the Department of Financial Services have been released last week and State Bank of India has been appointed as the nodal agency for this purpose. We have begun circulating this to the mills who are our clients. Perhaps the mills may begin approaching banks soon,” he said.

The District Credit Cooperative Banks ( DCCBs) disburse another R550 crore, taking the total quantum of loans to R1,000 crore. Normally the interest rate on pre-seasonal loans is around 14% and the loan duration is till June 30 of next year. Most of the mills repay the loan before March 31, since the recovery is through tagging out of production withdrawals, Karnad said.

Industry sources pointed out that the millers are reluctant to take on additional liability in their books since there is no clarity on the interest payment for the remaining four years. Of the R6,000 crore interest-free loan declared by the Centre, Maharashtra’s share comes upto R1,850 crore.

Vipin Sharma, Maharashtra sugar commissioner, however, says that mills have been approaching the commissionerate for seeking the 50% FRP clearance certificate and some 25 mills have been given certificates. Until July 15, the total FRP arrears come up to R3,111 crore and 40 factories with a gap of more than 30% in FRP payments have been summoned for hearings soon, he said.

Around 10 mills are shut after being issued revenue and recovery certificate (RRC) orders and remaining mills have been asked to pay up dues. Around 148 factories in the state have cleared more than 50% dues and therefore are eligible to seek the interest-free loan declared by the Centre.