Soft loan window for sugar mills extended
The Centre has extended the soft loan window for the beleaguered sugar industry by another four weeks.
The move is likely to ease some pressure on mills hit by piling arrears.
Under the fresh notification issued by the department of food and public distribution, banks could consider soft loan applications of those sugar mills which clear by March 26 at least 25 per cent of the sugarcane payables as on February 28.
The payables would be computed on the basis of the centrally-announced fair and remunerative price (FRP) of sugarcane, which stands at ~275 quintals for the current 2018-19 crushing season and not on the state advised price (SAP), which has been announced separately by some states, such as Uttar Pradesh.
In the current season, the SAP of sugarcane in UP, India’s top producer, for the common variety stands at ~315/quintal.
According to estimates, total outstanding of the domestic sugar mills at the end of February 2019 stood around ~22,000 crore, including ~10,000 crore in UP. Over the past few weeks, the payments percentage of sugar mills has, however, further dipped owing to higher sugar production, muted demand and flat prices.
Currently, the arrears of UP have further increased to about ~12,000 crore (on SAP basis), while pan India outstandings are estimated at more than ~24,000 crore.
“The pressure of payment to farmers is leading to distress sale by mills, which is further pulling down effective ex-factory sugar prices, thus worsening the payments ratio over the successive weeks,” a senior executive with a leading sugar producing company in UP told Business Standard.
Meanwhile, he claimed the UP government was unwilling to provide state guarantee to bankers for extending central soft loans to private sugar mills that are clubbed under the non-performing assets (NPA) heads. “Under the notification, the Centre has asked respective states to give guarantee to bankers with regard to the NPA account holders. However, the UP government is not ready to extend this facility, which would make the soft loan scheme unavailable to the needy and small millers,” he claimed, adding that big sugar mills that already enjoyed liberal cash credit limit with their bankers would avail of the facility.
Under the scheme, once the loan has been sanctioned and formalities for disbursal completed, a bank would obtain from the respective mills the list of farmers along with their bank account details and the extent of cane dues to be paid, computed on FRP basis.
Thereafter, the banks would directly remit funds allocated into the accounts of farmers on behalf of the sugar mill.