Maharashtra sugar mills seek clarity from RBI on soft loan norms

By: | Published: April 12, 2019 1:10 AM

Mills in Maharashtra have not been able to pay FRP in full to farmers and FRP dues still continue to remain a concern with the figure touching nearly Rs 5,000 crore.

The Centre had recently announced a soft loan of Rs 10,540 crore for payment of Fair and Remunerative Price (FRP) in the sugar season of 2019-2020.

The Maharashtra State Cooperative Sugar Factories Federation (MSCFF) has sought clarity in guidelines from the Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (Nabard) for the utilisation of the Centre’s scheme for a soft loan of Rs 10,540 crore.

The Centre had recently announced a soft loan of Rs 10,540 crore for payment of Fair and Remunerative Price (FRP) in the sugar season of 2019-2020.

Also read | TCS, Infosys Q4 earnings tomorrow: What to expect as IT majors release results same day for first time

In a representation to the government, the federation pointed out that bottlenecks continue to be hindrance for implementing the scheme, thus depriving the sugar mills from utilising the facility and coming out from the present financial crisis.

Sanjay Khatal, MD of the federation, pointed out to the exhaustion of the sectoral exposure of banks for the sugar industry, adding that there has been exhaustion of the unit exposure limit of individual mills as well.

The blockage of liquidity in the form of huge unsold stock of sugar both under Buffer Stock Scheme as well as under the Monthly Release Mechanism Quota System has led to financial distress, he said.

“There has been reluctance on the part of banks to consider equivalence between white sugar and raw sugar. Bankers are prepared to release stocks for raw sugar limited to financing value realisable at export price failing to recognise the assistance amount for FRP payment payable by the government,” he pointed out.

Read | Mission Impossible: How Modi government met fiscal deficit target against odds

The ministry of finance should urge RBI to analyse the situation in perspective and undertake some remedial measures so as to ensure that the scheme declared by the government gets effectively implemented, he said.

This should include measures such as relaxing sectoral exposure and unit exposure limit for a period of one year by at least 15%, permit 100% finance for Buffer Stock Scheme quantity instead of the present 85-90% and to equate valuation of white sugar and raw sugar with difference limited to Rs 100 per quintal towards difference in production cost, Khatal said.

The department of food and public distribution (DFPD) should permit 80% release of assistance towards FRP payment based on the “Let Export Order” in the Shipping Bill and Clean On-board Bill of Landing duly endorsed with “shipped on board” and containing details of Shipping bill number; instead of the present insistence of BRC for 100% release, he said.

Khatal said that the association had flagged the issues way back in May 2018 and July 2018.

Mills in Maharashtra have not been able to pay FRP in full to farmers and FRP dues still continue to remain a concern with the figure touching nearly Rs 5,000 crore.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition