Interest-free loans to sugar mills get CCEA approval

Business

Clearing the decks for the cash-starved sugar industry to raise interest-free loans from banks, the government on Thursday cleared the modalities for the sector to avail loans to the tune of Rs 6,600 crore for effecting timely payment to cane growers.

Last week, the Cabinet Committee on Economic Affairs (CCEA) had given an in-principal approval for providing interest-free loans to sugar mills and asked the food ministry to finalise the guidelines.

"In today's meeting, the CCEA approved the modalities for extending interest-free loans to the sugar industry," food minister KV Thomas said after the meeting.

The total interest burden on a loan of about Rs 6,600 crore, estimated at about Rs 2,700 crore over the next five years, is to be borne by the government from the Sugar Development Fund (SDF), he said. The loan would be disbursed through a separate bank account to ensure the utilisation of money is monitored.

The finance ministry is slated to issue requisite instructions to banks to operationalise the lending process, including appointment of nodal bank for the purpose, he said. As per the guidelines approved by the CCEA, the loans will be provided by banks to sugar mills exclusively for making payments to sugarcane farmers, including arrears. The loans would be equivalent to the excise duty, cess and surcharge on sugar paid by the mills in the past three years.

According to the plan, mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years. "No interest subvention (is) to be provided for the period of default in the principal repayments," an official statement said.

The loans would be extended to sugar mills, which have been functional during the 2013-14 season (October-September). Sugar mills with loans classified as Non Performing Assets (NPA) by the banks will also be eligible for the credit provided the concerned state governments give guarantee for their new loans.

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