Monday, 6 January 2014

Govt notifies guidelines for interest-free loans to sugar mills

With a view to improve liquidity position of beleaguered sugar industry, the government has notified the modalities in order to avail the sector with interest-free loans to the tune of Rs 6,600 crore from banks for payments to cane growers. The Food Ministry in its notification has stated that notified scheme for extending financial assistance to sugar undertakings 2014 will enable the industry to clear cane price arrears of previous seasons and timely settlement of cane price of current season.

The Cabinet Committee on Economic Affairs (CCEA) had approved Rs 6,600 crore loans for the cash-starved sugar mills last month. The interest burden on the loans is estimated at Rs 2,750 crore during the next five years and will be borne by the government from the Sugar Development Fund. The notification further added that interest subvention rate up to 12 percent, whichever is lower as per normal banking practice, shall be provided to sugar mills through participating scheduled commercial banks, regional rural banks and cooperative banks for five years.

The government will release interest subvention amounts on a quarterly basis in advance to the nodal bank, while, loan will be disbursed through a separate bank account to ensure the utilisation of money is monitored. On the other hand, in order to get loans, sugar mills will have to submit an utilisation certificate, verified by the sugarcane commissioner, stating the loan has been used for the specified purpose and state sugarcane commissioner will monitor utilisation of the loan. Furthermore, sugar mills with loans classified as non-performing assets by banks will be eligible for the credit provided the state governments concerned guarantee their new loans.

Further, Food Ministry notified that mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years. Loans will be given to sugar mills that have been functional during the 2013-14 (October-September) and the quantum of loan would be equivalent to the excise duty, cess and surcharge on sugar paid by the mills in the past three years. Meanwhile, Finance Ministry will soon issue instructions to banks to operationalise the scheme, including the appointment of the nodal bank.

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