A sweet package aiming to award zero-interest loans to the beleaguered sugar industry that was mooted by the agriculture ministry ran into bitter opposition from finance minister P Chidambaram at Cabinet meeting late on Thursday.
Although without much support from within the Cabinet, Chidambaram put up a strong defence, arguing that doling out such a sop to the sugar industry would open a veritable Pandora?s box, as it would trigger similar demands from other industries.
He pointed out that the sugar industry already received a 5% interest subsidy. According to sources, if the interest rate on loans were brought down to zero, it would result in an additional burden of Rs 1,300 crore on the exchequer.
Agriculture minister Sharad Pawar, however, countered that the zero-interest loan was necessary to help indebted sugarcane farmers who were adversely affected by the global slump in sugar prices. The agriculture ministry proposal recommends that loans to sugar mills be used to service The pending cane arrears of farmers.
The no-interest loans, which would then amount to a 12% subvention, would not only help sugarcane farmers in Maharashtra, but also in Uttar Pradesh and other states, he is reported to have said. To buttress his argument, Pawar even pointed out that the government was already being perceived as not being supportive enough of indebted farmers.
At the Cabinet meeting, sources said, some senior ministers, including external affairs minister Pranab Mukherjee, sided with Pawar, contending that the political implications of the problem would have to be looked into. After hearing out both sides, Prime Minister Manmohan Singh told Pawar and Chidambaram to sort out the issue amongst themselves and get back to the Cabinet.
Over the last few months, the government has been generous to the sugar lobby.