Union Cabineton Thursday gave its nod to the proposed interest subsidy of Rs 3,355 crore to sugar mills which are setting up distilleries for producing additional capacities as a part of the ethanol blending programme.

Addressing a media conference here, Union Finance Minister Arun Jaitley said this would be in addition to Rs 1,332 crore interest subvention on soft loans taken by sugar mills announced by the Government in June last year.

“The approval would help stressed sugar mills in improving liquidity by way of value addition to their revenues from supply of ethanol for fuel blending programme,” the minister said. This will indirectly help the mills in clearing their arrears to sugarcane farmers, he added.

A sum of Rs 2,790 crore will be allotted towards interest subvention for extending the indicative loan amount of Rs 12,900 crore by banks to the sugar mills. This will be done under a scheme to augment ethanol production in the country.

The Cabinet Committee on Economic Affairs (CCEA) also approved an additional Rs 565 crore towards the interest subsidy on loans amounting to Rs 2,600 crore. The molasses based stand-alone ethanol distilleries will be used for augmenting the capacity through installation of incineration boilers and other methods to ensure zero liquid discharge.

While 268 applications have been received under the former scheme, the scheme for standalone ethanol distilleries is to be formulated soon by the department of food and public distribution.

The interest subsidy to be paid under each of the schemes is six per cent per annum or 50 per cent of commercial interest charged by banks, an official statement said.

This is second such scheme being announced for sugar sector by the Government in this month. On March 1, it cleared a proposal to provide soft loans to the tune of Rs. 7,900-10,540 crore to the sugar industry, with the government bearing interest subvention of 7-10 per cent.

The loans, it said, are being provided to help the industry clear sugarcane dues to the farmers, which have crossed Rs. 20,000 crore as on February 22.

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