Under immense pressure to get the cane dues of the last season cleared urgently before the new season begins in less than a month’s time, the Yogi Adityanath government in Uttar Pradesh on Tuesday announced a soft loan of Rs 4,000 crore plus a subsidy of Rs 4.50/quintal to clear the dues of the farmers by November 30.
Briefing newsmen after the cabinet meeting, the chief minister said the soft loans will be provided through banks and other financial institutions on an interest rate of 5% for five years to all those sugar mills that have paid at least 30% of their total cane dues. In case of default, a compounding interest of 12% would be charged.
“The prices of sugar in domestic and international markets have reached an all-time low, which is one of the reasons why mills are unable to clear their dues. This soft loan will help the industry in clearing these dues,” said an official of the department. “We have set the deadline of November 30 for sugar mills to settle their arrears,” he said, adding that the total cane crushed this season was 1,111.90 tonnes. While the total cost of this stands at Rs 35,458 crores, payment of Rs 25,888 crores have already been made to the farmers. The total cane arrears for 2017-18 now stand at Rs 9,770 crores, out of which private mills have to pay `8,500 crores, while the cooperative mills have to pay Rs 887 crores.
Meanwhile, the industry is not happy with this so-called “bail-out”. Talking to FE on condition of anonymity, an industry insider said this will only make things worse in the coming days. “The industry has no cash-flow. How are we supposed to service the loans? We did not ask for a soft loan. Instead we had asked for a cash assistance of Rs 40/quintal. A loan would only pile up more debt on us.”
Another industry expert said, “the UP sugar industry is already suffering due to differences between the FRP (Fair and Remunerative price) and SAP (state-advised price). So while the Central government has come up with measures to support the industry in paying the FRP, the state government is doing nothing to fill in the gap between the FRP and SAP. By giving us a soft loans, the government is not helping us bridge the loss, rather creating another debt for us, which doesn’t help. Our debt-equity ratio will worsen and our ratings will suffer. Why should the industry take such a risk.”
Many experts believe that with the general elections round the corner, the government wants the cane dues to be cleared so that its slate is wiped clean before going to the hustings. “The government is trying to live its own dreams through us. It does not want to understand or implement any of the recommendations by various expert committees. This is pure politics and nothing else,” said another industrialist.