The government on Wednesday approved Rs 6,000 crore interest-free loan to sugar mills to help them partly clear cane price arrears to farmers that have touched about Rs 21,000 crore.
The decision, which will cost the exchequer about Rs 600 crore, was taken in a meeting of the Cabinet Committee on Economic Affairs (CCEA) held in New Delhi on Wednesday.
“Mills have been unable to make payment to farmers because of high production and lower domestic prices. Cane arrears have reached Rs 21,000 crore,” Union Minister Nitin Gadkari told reporters after the meet.
“The government has sanctioned interest-free loan of Rs 6,000 crore for farmers. Sugar mills will prepare the list of farmers. And on the basis of that, the amount will be directly transferred by banks into the Jan Dhan accounts of farmers,” he said.
The Centre will bear the interest burden of Rs 600 crore from the Sugar Development Fund (SDF), he said, adding that the arrears outstanding till June will be cleared.
“CCEA has provided a 1-year moratorium on this loan, and will bear the interest subvention cost to the extent of Rs 600 crore for the said period,” an official statement said.
CCEA also decided that the loans would be provided to those units which clear at least 50 per cent of their outstanding arrears before June 30, 2015.
This is the second time that the Centre is providing interest-free loan to cash-starved mills. In December 2013, the UPA government had given interest-free loans of Rs 6,600 crore to make payments to cane farmers.
Gadkari said the Centre has already taken many measures including the hike in sugar import duty to 40 per cent, export subsidy of Rs 4,000 per tonne on raw sugar and an increase in ethanol prices to promote its blending with petrol.
“This decision is not to support the industry, but keep interests of farmers in mind,” Gadkari said.
India’s sugar production is estimated to cross 28 million tonnes in 2014-15 marketing year (October-September), against 24.3 million tonnes in the previous year. The total annual demand is pegged at 24 million tonnes.
Stating that the cost of raw material is more than the end product, Gadkari said sugar prices have fallen to Rs 22 per kg from the earlier Rs 34 per kg.