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Government gives banks 15 days to disburse soft loan to sugar mills

Mills applied for a soft loan of Rs 2,700 cr and the banks were to disburse this amount by September 30. However, banks have disbursed only Rs 800 cr.

twitter-logoPTI | October 2, 2015 | Updated 16:07 IST
Keeping the interest of farmers in mind, banks have been given time till October 15 to disburse the rest Rs 1,900 crore loan to mills.
Keeping the interest of farmers in mind, banks have been given time till October 15 to disburse the rest Rs 1,900 crore loan to mills. (Photo: Reuters)

Government has given 15 more days to banks for disbursing Rs 1,900 crore soft loans to sugar mills to help them clear cane arrears to farmers that total over Rs 12,000 crore.

Out of the Rs 6,000 crore soft loan approved by government to bail out the sugar industry, mills applied to avail loans for only Rs 2,700 crore. However, banks have been able to disburse only Rs 800 crore till the September 30 deadline and the rest Rs 1,900 crore is still to be given.

The Centre had in June approved Rs 6,000 crore soft loan for the 2014-15 season (October-September) to improve mills' liquidity position, which has been affected due to lower sugar prices and high cane rates.

As per the policy, banks were asked to disburse soft loan by September-end. Mills that cleared 50 per cent of their outstanding dues to farmers by August 31 were eligible for the loan.

Mills applied for a soft loan of Rs 2,700 crore and the banks were to disburse this amount by September 30. However, banks have disbursed only Rs 800 crore.

Keeping the interest of farmers in mind, banks have been given time till October 15 to disburse the rest Rs 1,900 crore loan to mills, a senior Food Ministry official told PTI.

The government will bear interest burden up to 10 per cent simple interest or actual rate of interest charged by the bank, whichever is less for maximum of one year by way of interest subvention.

Sugarcane arrears, which stood at Rs 21,000 crore in April this year, have come down to Rs 12,248 crore at the end of the 2014-15 season, as per the government data.

The arrears reduced substantially on account of a number of government measures such as the soft loan, hike in import duty and raising ethanol blending with petrol to 10 per cent so as to infuse liquidity into the sugar sector.

Sugar production is estimated at record 28.3 million tonnes in 2014-15 marketing year (October-September), as against 24.3 million tonnes in the previous year, while the total annual demand is pegged at 24.5 million tonnes.

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