New Delhi: The government on Thursday said it is examining providing additional interest-free loans of Rs 4,400 crore to cash-starved sugar mills to clear dues to cane farmers.
It is also looking at hiking sugar import duty from 15 percent to 40 percent to curb cheap imports and increase ethanol blending in petrol to 10 percent as an effort to improve the liquidity of mills.
"The main concern raised was how to clear Rs 11,000 crore sugarcane dues to farmers at the earliest. A suggestion has been made to extend loans given equivalent to the excise duty paid by the mills in the past three years to five years," Food Minister Ram Vilas Paswan told reporters after an informal meeting with other Cabinet ministers.
"Each minister has given suggestions. We have not yet taken any decision...We will discuss among ministries and with the Prime Minister what we can do best for the benefit of both farmers and mills. A cabinet note will be prepared accordingly," he added.
In December, the government had approved Rs 6,600 crore interest-free loans to the sugar industry exclusively for clearing sugarcane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.
A senior Food Ministry official said if loans against excise duty are extended by two years it would mean that mills can avail of additional interest-free loans of Rs 4,400 crore from banks. This will improve their cash flow.
Minister of Road Transport, Shipping and Highways Nitin Gadkari, Agriculture Minister Radha Mohan Singh, Petroleum Minister Dharmendra Pradhan, Women and Child Development Minister Maneka Gandhi, Micro, Small and Medium Enterprises Kalraj Mishra were among those present at the meeting.
As per the industry body Indian Sugar Mills Association, banks have disbursed about Rs 3,500 crore loans of the total Rs 6,600 crore approved by the government.
Paswan said that second suggestion made in the meeting was to hike import duty on sugar to 40 percent from the existing 15 percent.
"I will discuss this issue with the Finance Minister, who has the authority to take a call on this subject," he said.
The third recommendation was to increase ethanol blending in petrol. The Petroleum Minister said he will look into the matter as ethanol blending in India is not even 2 percent at present, while in Brazil it is up to 85 percent.
"Overall, we will not allow mill owners to reach a situation that they shut operations. We will not allow farmers also to reach a starvation death situation," Paswan said, adding that the government will take steps to address the concerns of both farmers as well as "genuine sugar mills."
Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh, ISMA said.
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.
