Wednesday 27 October 2021
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Soft loan to sugar mills

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New Delhi — To further infuse liquidity into the sugar industry and facilitate clearing of cane dues arrears, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved a soft loan scheme of up to Rs 6,000 crore for the current sugar season. This will ensure that farmers are paid their dues expeditiously.

The CCEA has further mandated that banks pass on the financial assistance directly to the cane growers after obtaining the list from the mills. In order to offer incentives to mills to clear their dues expeditiously, the government had earlier mandated that soft loans be provided to only those units that have cleared at least 50% of their outstanding arrears by 30 June of this year.

There is 1-year moratorium on this loan, which will bear the interest subvention cost to the extent of Rs 600 crore for the said period.

As a result of this intervention, the cane price arrears are steadily reducing; they presently stand at Rs 15,400 crore. To increase liquidation of arrears and enhance coverage of the soft loan scheme, the government has decided to extend the date of achieving eligibility under the soft loan scheme from 30 June to 31 August.

Now mills are required to discharge 50% of cane dues payable by 31 August to become eligible for the loan. This will extend benefits to a larger number of farmers by enabling more mills to avail the benefits of the scheme.

It has further been decided that, after clearing dues to the farmers, subsequent balance, if any, will be credited into the mill accounts. This will benefit about 150 additional sugar mills that had pro-actively liquidated more than 90% of their cane dues payable. This is to ensure that mills get incentives for arranging finances for timely clearance of cane dues to farmers.

Sustained surplus of production over domestic has created substantial inventories, depressing price sentiments and creating liquidity stress, which has resulted in cane dues arrears. The NDA government has taken steps to mitigate the situation by infusing liquidity into the sector. The export incentive on sugar has been increased from Rs 3200/MT to Rs 4000/MT. Funds have been allocated to support 14 lac MT (LMT) of raw sugar exports as against 7.5 LMT achieved last year. Results of these measures should be known at the end of the current sugar season.

Remunerative prices for ethanol that is supplied for blending has been fixed. Prices have been increased to Rs 49 per litre — a substantial increase over previous years. As a result, the supplies of ethanol for blending have increased from about 32 crore litre per year to 83 crore litre per annum.

Excise duties on ethanol supplied for blending in the next sugar season has been waived to further encourage ethanol supplies for the blending purpose. This is expected to increase the ex-mill price of ethanol and help improve liquidity in the industry, facilitating payment of cane price arrears.

The government had also increased import duty on sugar to 40%, abolished the Duty Free Import Authorization Scheme, to prevent possible leakages of the commodity in the domestic market. The government has also reduced the export obligation period from 18 months to 6 months under the Advanced Authorization Scheme. These measures are intended to improve price sentiments.

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