GoMs dilemma: Finmin refuses to hike relief to sugar industry

Written by ASHOK B SHARMA | New Delhi, Jul 22 | Updated: Jul 23 2007, 04:59am hrs
The group of ministers (GoM) headed by the external affairs minister Pranab Mukherjee is faced with the problem of formulating a new debt restructuring package for sugar mills as the Union finance ministry has refused to increase the interest subvention on loans beyond the estimated Rs 560 crore.

The GoM is slated to meet on July 24 to discuss issues relating to relief to sugar industry which includes extension of moratorium for repayment by another three years for cooperative mills, debt restructuring package for private sugar mills, deferment of payment of central excise duty for three years, mandatory 10% blending of petrol with ethanol from October, this year and categorisation of denatured alcohol and ethanol as goods of special importance.

With the sugar industry reeling under financial stress since 2001 due to two successive droughts, the government announced a Nabard package for cooperative mills in September 2005 rescheduling of term loans up to 15 years with two year moratorium and reduction in interest rate to 10% per annum. The estimated interest subvention of Rs 525 crore would be borned by the Union government.

So far only 103 cooperative sugar mills could avail of the Nabard package which involved a total interest subvention amount of Rs 317 crore. The Union food ministry has pleaded that due to falling sugar prices on account of surplus production, the sugar mills are not in a position to service their restructured loans and hence moratorium period for repayment which expired on April 1, 2007 should be extended by another 3 years.

This will also help other deserving cooperative sugar mills to avail benefits under the scheme. The ministry has pleaded that similar benefits should be extended to private sugar mills. It said that even though the private sugar mills can get their debts restructed through corporate debt restructuring (CDR) scheme, few of them could get the benefit when the industry was in crisis a few years back as is the case now.