Govt may go for interest-free loans, rate revision to save sugar industry

Written by fe Bureau | New Delhi & Pune | Updated: Nov 21 2013, 14:12pm hrs
In a bid to bolster the beleaguered sugar industry, the government may go for interest-free loans and increase excise duty drawback rates for exports. It is also considering lowering the period for imported raw sugar re-shipment.

A high-level meeting on Wednesday attended by finance minister P Chidambaram, agriculture minister Sharad Pawar, food ministry officials and industry representatives deliberated on issues concerning the sugar industries in Uttar Pradesh and Maharashtra.

On Tuesday, over 70 sugar mills decided to down shutters protesting the government's decision to go for last year's levels of state advised prices for cane.

The UP industry, faced with mounting losses, said the SAP should not be more than Rs 225/quintal.

Pawar said the government would take a decision on issues concerning sugar sector, including fall in prices in next 8-10 days. "The issue is that sugar prices have dropped and that's why the industry is facing serious problems and that's why we are discussing. Three-four alternatives were discussed," he said

However, civil aviation minister Ajit Singh (who hails from the UP sugar belt) told reporters after the meeting that the Cabinet would shortly consider a proposal for interest-free loans from banks to the industry. The cost of this will be borne by the Centre through the Sugar Development Fund. Increasing the drawback from the current level of 1.3% and reducing the period for imported raw sugar for re-exports from 18 months to three months are also under consideration.

"Sugar industry is in trouble and lot of farmers are also in trouble. We have discussed these measures, but the Cabinet has to take a final call on them," Singh said.

As per data released by Indian Sugar Mills Association (ISMA), the surplus stock currently stands at 8.8 million tonne as on October 1, of which around 5.8 mt is expected to be consumed leaving a balance of around 3 mt.

Abhinash Verma, director-general, ISMA said, Another 1.5-2 mt of sugar is also expected after crushing operations next year.

Earlier, Ajit Singh had written a letter to PM Manmohan Singh demanding export sops and hike in import duty to improve finances of millers. The letter was sent in the backdrop of sugar mills, particularly from UP, facing financial problems because of lower sugar rates.

UP mills have not been able pay cane arrears to the tune of R2,400 crore. They have also incurred a cash loss of R3,000 crore last year.

A closed-door meet was also held in Maharashtra on late Tuesday night between chief minister Prithviraj Chavan, deputy chief minister Ajit Pawar, state cooperation minister Harshavardhan Patil to discuss the sops sought by the industry in the state from the Centre.

In addition to an interest subvention package, Maharashtra millers have also asked for transport subsidies of R500 a quintal from the Centre and R300 a quintal from the state government and demanded the import duty be raised from 15% to 60%.

The sector also wants an export subsidy of R5,000 a tonne to bridge the gap between the cost of production and prices in the international market. The sector has urged the Centre to create a buffer stock of five million tonnes.

The sugar industries in UP and Maharashtra that produce 90% of the country's annual sugar production have not started crushing sugarcane in the new crop year for 2013-14 because of mounting cane arrears, rising stocks and demand from the farmers for higher cane prices.

ISMA had recently stated that industry across the country has suffered substantial losses during the last sugar season.

Key reasons attributed for these losses include unreasonably high sugarcane prices fixed or influenced by respective state governments and low sugar prices.