The Hindu Business Line : Loan waiver: Bounty for cane farmers

Chennai, March 4 The defaulters among the farmers must be one relieved bunch, thanks to the Rs 60,000-crore loan waiver announced by the Centre. Sugarcane farmers’ net profit this season is expected to jump 5-6 times thanks to the waiver, say farmers and millers.

Tripartite agreement

Routinely, farmers, sugar mills and banks enter into a tripartite agreement on sugarcane. Banks extend a crop loan to the farmer who raises the sugarcane crop and sells it to the mills at a price fixed by the Centre. The mill deducts the bank loan and interest before paying the farmer.

Typically, over 60-70 per cent of the cost of a tonne of sugarcane goes to the bank. This will now be paid to the farmer. Depending on the costs, the farmer usually makes a net profit of about 10 per cent. Till recently, the net income from cane was estimated at about 20 per cent but in the last two seasons, because of the high costs of harvesting, this has dropped to about 10 per cent.

Take home money

According to a farmers’ representative, banks disburse about Rs 20,000 an acre as sugarcane crop loan. Taking into account the interest, the total repayment to the banks is about Rs 22,000. Now, thanks to the loan waiver, the small and marginal farmers eligible under the waiver will take home about Rs 22,000 an acre more for the current season.

Effectively, taking an average output of about 40 tonnes an acre, that works out to about Rs 550 more a tonne – that is a net profit of 5-6 times more on cane, they say.

Industry sources said that with the farmers getting a hint of a major concession in the offing ahead of the Budget, they had actually approached the millers to hold on to the cane payments to avail themselves of the benefit.

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