Some relief is on way for beleagured sugar mills reeling under huge losses. To make things easy, cheap credit from banks is the mantra. The Centre is close to finalising the relief package cleared by cabinet almost a month back. Reserve Bank of India too will be taking a call in terms of how banks will treat loans that will be given to defaulting companies.
It is the worst ever crisis in the sugar industry and a desperate union government is still working on the arithmetic of a bailout package as well as how to get banks on board, to lend to defaulters, Finance ministry officials say.Banks will give sugar mills subsidised loans worth Rs 3,900 crore this fiscal. These loans will cost 7-8 per cent with a two year moratorium on repayment. All this translates into an interest subsidy of Rs 650-700 crore.
But the industry says that these soft loans won''t amount too much. And the crisis is now almost systemic. In the first quarter alone sugar mills owed Rs 3,500 crore to sugarcane farmers as payment arrears for cane. By the end of October, sugar mills of UP alone owed Rs 1,400 crore to farmers.
Sugar prices are expected to fall further by the next crushing season pushing up the loss per quintal. But if sugar mills can''t afford to pay farmers then how they repay loans from banks, said S L Jain, DG, Indian Sugar Mills Association. So, even while the union ministers and their babus work out the maths and the mechanics of a subsidy package for sugar mills, it will not prove to be the quick fix, which government had promised.
It is the worst ever crisis in the sugar industry and a desperate union government is still working on the arithmetic of a bailout package as well as how to get banks on board, to lend to defaulters, Finance ministry officials say.Banks will give sugar mills subsidised loans worth Rs 3,900 crore this fiscal. These loans will cost 7-8 per cent with a two year moratorium on repayment. All this translates into an interest subsidy of Rs 650-700 crore.
But the industry says that these soft loans won''t amount too much. And the crisis is now almost systemic. In the first quarter alone sugar mills owed Rs 3,500 crore to sugarcane farmers as payment arrears for cane. By the end of October, sugar mills of UP alone owed Rs 1,400 crore to farmers.
Sugar prices are expected to fall further by the next crushing season pushing up the loss per quintal. But if sugar mills can''t afford to pay farmers then how they repay loans from banks, said S L Jain, DG, Indian Sugar Mills Association. So, even while the union ministers and their babus work out the maths and the mechanics of a subsidy package for sugar mills, it will not prove to be the quick fix, which government had promised.
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