The government today decided to provide interest-free loans of Rs 6,600 crore to cash-starved sugar mills to make payments to cane farmers.
The entire interest burden,estimated at Rs 2,750 crore over the next five years,will be borne by the government,according to sources.
The Cabinet Committee on Economic Affairs (CCEA) has approved Rs 6,600 crore interest-free loans to the sugar industry. The interest subvention will be 12 per cent,which will be borne by the Sugar Development Fund, food minister KV Thomas said.
The food ministry proposal before the CCEA was based on the recommendations of the informal group of ministers,which was set up by the Prime Minister under the chairmanship of agriculture minister Sharad Pawar to address the industrys cash crunch.
The loans will be provided by banks to sugar mills exclusively for making payments to sugarcane farmers,including arrears. The loans are equivalent to the excise duty paid by the mills in the past three years.
Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years. The ministry had originally proposed that 7 per cent of the interest burden would come from the Sugar Development Fund and the rest from the exchequer,which the CCEA revised.