New Delhi: The government on Monday decided to provide additional interest-free loan of up to Rs 4,400 crore to sugar mills and hike import duty on sweetener to enable the cash-starved industry pay their huge arrears to sugarcane farmers.
Import duty on sugar will be increased to 40 percent from 15 percent and export subsidy will be extended till September this year to give relief to the sugar industry, which owes Rs 11,000 crore to cane growers largely from Uttar Pradesh.
Efforts will be made to implement mandatory 5 percent ethanol blending with petrol and subsequently achieve 10 percent blending.
These decisions were taken at a high-level meeting called by Food Minister Ram Vilas Paswan, following Prime Minister's direction. Industry Body ISMA hailed the decision saying this will improve cash-flow of millers and help clear cane arrears.
Transport Minister Nitin Gadkari, MSME Minister Kalraj Mishra, Commerce Minister Nirmala Sitharaman, Women and Child Development Minister Maneka Gandhi, Petroleum Minister Dharmendra Pradhan, Principal Secretary to the PM Nripendra Misra and Cabinet Secretary Ajit Seth attended the meeting.
"We have taken four key decisions. We have decided to extend the interest-free loan given against excise duty paid by sugar mills for five years instead of three years," Paswan told reporters after the meeting.
Mills can avail additional interest-free loans of up to Rs 4,400 crore from banks, he said, adding this will improve their cash flow to make cane payments.
However, the minister said the department is yet to calculate the exact interest-free loans to be provided to the industry against excise-duty.
In December, the Centre had approved Rs 6,600 crore interest-free loans for the sugar industry for clearing cane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.
These decisions will be subject to the mills giving guarantee that they will clear Rs 11,000 crore sugarcane arrears at the earliest, Paswan said.
"We don't have any problems to announce these incentives formally if millers are ready to make payments. If they give assurance today, we will announce incentives today itself", Paswan said.
Some of the decisions will be notified by concerned ministries, while some require the Cabinet nod, he added.
Reacting to the decisions, Industry body ISMA Director General Abinash Verma said: "Out of Rs 6,600 crore claims for loans, about Rs 4,000 crore has been disbursed by banks so far based on the eligibility and the criteria set by the government".
"If this is taken into account, we expect Rs 2,500-3,000 crore loans may finally get disbursed out of the approximately Rs 4,400 crore claims that might come up," he said.
"With improvement in the sentiment because of these decisions taken by the government, we should be able to sell sugar and clear cane arrears soon, which is our top priority," Verma said.
Besides interest-free loan, Paswan said, "We have decided to increase the sugar import duty to 40 percent from the current 15 percent and extend the sugar export incentive of Rs 3,300 per tonne till September this year."
In order to encourage biofuel on the lines of Brazilian model, the government has decided to subsequently increase mandatory level of ethanol blending with petrol to 10 percent from the existing five per cent, he said.
"The Petroleum Minister has assured 10 percent ethanol blending with petrol," Paswan said.
It was in 2006 that the government launched the ethanol blending programme, which could not progress due to differences between sugar mills and oil companies over pricing.
Expressing concern over mounting cane arrears, Paswan said, "While the Centre fixes the cane price, some states are fixing higher prices that are putting burden on millers. There should be a holistic view on pricing."
The sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.
Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh.
Mills are facing a cash crunch as domestic prices have slipped below the cost of production, hurting their profits. They also fear domestic prices could fall further if cheaper imports are not curbed.
Currently, sugar is being imported in smaller quantities. The decision to hike the import duty is expected to curb such shipments.
