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The Narendra Modi government, keen to avoid any political fallout arising from mounting arrears to sugarcane farmers, has decided to give soft loans of up to ₹10,500 crore to sugar mills. However, many needy sugar producers may not get the benefit.
The Union Cabinet on Thursday cleared a proposal from the Food Ministry to provide soft loans to the tune of ₹7,900-10,540 crore to the sugar industry, with the government bearing interest subvention of 7-10 per cent. According to an official statement, this would cost the exchequer anywhere between ₹553 crore and ₹1,054 crore. The loans are being provided to help the industry clear sugarcane dues to the farmers, which have crossed ₹20,000 crore as on February 22.
According to an official statement, the plan is to ask banks collect details of farmers who are awaiting payment of arrears and pay the amount directly into their accounts.
Subsequent balance, if any, would be credited to the mill’s account. A spokesperson for the Indian Sugar Mills Association (ISMA), the trade body of sugar mills, welcomed the move saying that many mills would benefit from the measure.
Who will benefit?
However, experience from similar schemes in the past has shown that a number of needy mills, which have higher pending arrears, probably may not benefit much as they are in the bad books of banks.
“A back-of-the-envelope calculation shows that nearly 25 per cent of the mills, most of which have substantial dues, will not get these loans. On the contrary, those who are eligible are those who are anyway clearing the arrears with some delays, say up to one or two months,” said a senior official with a sugar mill, who doesn’t want to be named.
Industry sources also said that the available interest subsidy is also lower compared to the earlier years.
While a similar scheme in 2012-13 gave an interest subvention of 12 per cent for 5 years, another in 2014-15 gave mills an interest subsidy of 10 per cent for a year.
“Moreover, the scheme would take at least 2-3 months to be implemented and the situation will remain the same till then,” the company official said, indicating that the measure will not reduce the arrears burden substantially till the time the elections are held.
ISMA, on other hand, has been making a representation to the government to increase the minimum selling price (MSP) to ₹35-36 per kg, which, it said, is the actual cost of production.
Currently, the MSP of sugar is ₹31 per kg, after the government increased it from ₹29 about a month ago.
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