Government approves Soft loan scheme to sugar mills to facilitate payment of cane dues of farmers

August 13, 2015

In order to infuse liquidity into the sugar industry and facilitate clearing of cane dues arrears government approved a soft loan scheme worth Rs. 6000 crore for the current sugar season.

Soft loan Scheme:

As per this scheme the Banks has to pass on the financial assistance directly to the listed cane growers.
The scheme extends only to those sugar industries which have cleared at least 50 percent of their outstanding arrears.
The moratorium for this soft loan has been provided for one year, whereas the government will bear the interest subvention cost to the extent of Rs. 600 crore for that one year.
It has also been decided that after clearing cane dues of farmers the balance left will be credited into the mill accounts.

Other mandates passed by Government for Sugar Industries:

The export incentive on raw sugar has been increased from Rs 3200/MT to Rs. 4000/MT.
Funds support extended on 14 lakh MT of raw sugar exports as against 7.5 LMT achieved last year.
In order to prevent possible leakages of sugar in the domestic markets government had also increased import duty to 40 percent.
Government has abolished the Duty Free Import Authorization Scheme.
Government has further reduced the export obligation period from 18 months to 6 months under the Advanced Authorization Scheme.
Remunerative prices for Ethanol supplied for blending has been increased to Rs. 49 per litre.
Excise duties on ethanol supplied for blending in the next sugar season has been abolished.

Implications:

These efforts of government will ensure that mills are incentivized for arranging bridge finances for timely clearance of cane dues to farmers.
These will ensure benefits to larger number of farmers by enabling more mills to avail the benefits of the scheme.
It will increase liquidity in the sugar industry and will facilitate payment of cane price arrears.
All these measures are intended to improve sugar price sentiments.

Note: As a result of the above interventions the cane price arrears are steadily reducing and presently stand at Rs.15,400 crore.

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