The move to raise cane FRP will raise the costs of cash-strapped mills by roughly Re 1 for producing each kg of sugar to at least Rs 34 and further strain their ability to clear cane dues on time unless the benchmark selling price is also revised up for 2020-21.
The government on Wednesday announced a clutch of decisions to impart momentum to the sputtering wheels of the economy — three more airports, in addition to an earlier three, will be transferred to the private sector Adani group under 50-year leases for modernisation and maintenance; more discoms will be able to raise working capital loans to the extent of their needs from the public-sector PFC-REC under a special liquidity window and clear the mounting dues to gencos; more MSMEs will find it possible to access NBFC funds under the so-called trade receivables discounting system, as the facility has been cast wider to include ‘all’ shadow lenders.
Also, the Cabinet Committee on Economic Affairs cleared a proposal to hike the fair and remunerative price (FRP) of cane to Rs 285 per quintal for the 2020-21 marketing year starting October 1 from the current Rs 275 but stopped short of raising the minimum selling price of sugar.
The Cabinet relaxed the eligibility criteria for still-not-out-of-the-woods power distribution companies (discoms) to avail working capital loans under the Centre’s new Rs 90,000 crore liquidity infusion scheme. As per the one-time relaxation, public-sector sector-specific lenders PFC-REC can now lend to discoms even beyond the cap of 25% of previous year’s revenue imposed under the Ujwal Discom Assurance Yojana (Uday) scheme. Tamil Nadu and Bihar discoms are among the ones that will benefit from the move, as these entities will now be able to raise loans to the extent of their estimated requirements under the liquidity scheme.
The discoms are supposed to use the loan amounts to clear their overdues — payment default of 60 days or more — to the generators. On an all-India basis, these dues stood at a staggering Rs 94,546 crore at the end of March 2020, according to the government’s ‘Praapti’ portal.
Tamil Nadu and Bihar had sought loans of Rs 20,622 crore and Rs 3,524 crore under the liquidity infusion scheme, and wanted the relaxation of the Uday borrowing limit. According to the design of the scheme, discoms having the headroom to borrow within the Uday working capital limits can receive the loans immediately. Discoms which have already borrowed beyond the Uday parameters will be eligible for these loans only to the extent of the amount receivable to them from their respective state governments, in the form of unpaid subsidies and dues (pending bills of civic bodies and other such institutions). Such government department dues to discoms stood at about Rs 54,000 crore across the country as on March 31. Wednesday’s Cabinet decision will primarily help discoms which have breached the working capital limit, but do not have substantial receivables from their state governments.
Paving the way for Adani Enterprises to bag three more airports — Thiruvananthapuram, Jaipur and Guwahati — the Cabinet accorded its approval for leasing of these airports to the firm for operation, management and development got a period of 50 years. Adani had emerged as the successful bidder in the global auction conducted by the Airports Authority of India (AAI) in November 2018, but certain litigation and other issues impended the handover process.
“Besides bringing in efficiency in running of these (three) airports, the upfront Rs 1,070 crore fee that will come to AAI from Adani will be used for developing smaller airports, union minister for environment Prakash Javadekar said. The government had commenced leasing process of state-run airports in November 2018 by inviting global bids for six airports, in all of which Adani had emerged as the highest bidder. Of these, Adani has already been issued letters of award for airports at Ahmedabad, Mangalore and Lucknow.
The Kerala government had moved the High Court and then the Supreme Court (SC) against the proposal of the AAI to award the airport to the Adani, which it said has no experience in managing airports. In December last year, the Kerala High Court had dismissed the plea filed by the state. In February this year, the SC sent back the dispute for adjudication back to the high court.
The move to raise cane FRP will raise the costs of cash-strapped mills by roughly Re 1 for producing each kg of sugar to at least Rs 34 and further strain their ability to clear cane dues on time unless the benchmark selling price is also revised up for 2020-21. Already, cane arrears stood at Rs 17,000-17,500 crore at the end of July, a record for this time of the year.
The Niti Aayog had in April recommended a hike in the minimum selling price to Rs 33 per kg from Rs 31now, factoring in the cane FRP of Rs 275 per quintal. A panel of ministers under home minister Amit Shah last month asked the food ministry to place the proposal before the Cabinet. Abinash Verma, director-general of the Indian Sugar Mills Association, said unless the minimum selling price of sugar isn’t revised up factoring in the latest hike in the FRP, “clearance of cane price arrears and payment of the higher FRP to farmers will get badly affected”.
The cane FRP is linked to a basic recovery rate of 10%, beyond which a premium of Rs 2.85 will be charged to mills for every 0.1 percentage point rise.
National Recruitment Agency
The Cabinet has approved a proposal to set up a National Recruitment Agency (NRA) that will conduct the Common Eligibility Test (CET) online to select candidates to non-gazetted posts in the central government and public sector banks. The Budget for 2020-21 had proposed the creation of the NRA. The NRA will conduct the first-level test by the Staff Selection Commission, the Railway Recruitment Boards and the Institute of Banking Service Personnel.
At present, on an average, 2.5-3 crore candidates appear in each of these examinations. A common eligibility Test would enable these candidates to appear once and apply to any or all of these recruitment agencies for the higher level of examination, according to an official statement. The score secured in the CET will remain valid for three years and there will be no bar on the number of attempts.
Trade receivables discounting system
To improve the cash flow of MSMEs, whose payments against supplies are stuck for more than 90 days, the Cabinet has decided to allow all non-banking financial companies to participate in the trade receivables discounting system, instead of limiting it to only select NBFCs, information and broadcasting minister Prakash Javadekar said after the Cabinet meeting.