Sugar mills term the government’s relief package as a ‘band aid’ approach. The millers are not enthused with the Centre’s announcement of the one-year interest-free loan of ₹6,000 crore, which was to bail out the industry burdened by huge cane arrears to farmers.

Mills in Uttar Pradesh that account for ₹6,700 crore of the total ₹21,000 crore dues owed to cane farmers feel that the Centre’s move is unlikely to benefit them since most could not meet the criteria of 50 per cent of arrears needing to be paid by June 30.

At a time when the industry was unable to get working capital loans from banks, it would have made more sense for the government to take out a quantum of the surplus sugar in the country.

“If a miller takes the loan, it still needs to be paid back by the end of the year. There are conditions attached and most mills will be unable to meet the 50 per cent arrears payment clause,” said an industry source.

The Indian Sugar Mills Association (ISMA) has made a similar demand and has asked the loan to be given to a buyer like the Food Corporation of India (FCI) in order to take out 2.5-3 mt of sugar from the market.

Adding to the burden

Sanjeev Babar, Managing Director, Maharashtra State Co-operative Sugar Factories Federation, said that the government offer would only add to the sugar mills burden as they have to anyway repay it with interest at a later stage.

There are 178 co-operative sugar mills in Maharashtra and they owe about ₹3,400 crore to farmers. “This kind of piecemeal solution is not going to help the industry come out of the mess. We were expecting a kind of financial package that will lead to a long term sustainable solution,” he said.

The cost of production for co-operative sugar mills in Maharashtra works out to about ₹3,200-3,400 a tonne while sugar is sold at ₹2,100-2,200/tonne, said Babar.

The industry has appealed the government to extend the incentive of ₹4,000/tonne offered on raw sugar exports for the current crushing season till 2019-20 and create a 5 mt buffer stock. This apart, the industry has also asked the government to foot the gap between the production cost and selling price by providing a financial support of at least ₹850/tonne.

Rajshree Pathy, Chairperson, Confederation of Indian Industry – Southern Region, felt that as a concept the loan assistance is welcome, but it is grossly inadequate as the total sugarcane payment arrears is estimated at about ₹21,000 crore.

Rajshree, who is also the Chairman and Managing Director, Rajshree Sugars and Past President, Indian Sugar Mills Association, said the industry was hoping for more concrete and long-term measures, including financial restructuring, two-year moratorium on interest and principal repayment, sugar buffer stock creation to tackle 2.5 million tonnes of sugar stock, and viable sugar cane pricing mechanism.

Palani G Periasamy, President, South Indian Sugar Mills Association – TN, said the government could have opted for direct subsidy to farmers for sugarcane payment rather than burdening the cash-strapped sugar mills with an option to borrow more.

N Ramanathan, Managing Director, Ponni Sugars, said if the loan support is to come through the banking system, companies that need it most will not be able to avail the support. Banks do not consider sugar industry bankable and have given it a low credit rating, he said.

With inputs from Tomojit Basu in New Delhi, and R Balaji in Chennai

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