New Delhi: The Food Ministry will soon seek Cabinet nod for providing interest-free loans to cash-starved sugar mills to help them meet working capital requirements.
"Our Department is considering a proposal of interest- free loan scheme for the sugar industry. We are preparing a Cabinet note," Food Secretary Sudhir Kumar told the agency.
The move follows discussions on issues facing the sugar industry at a meeting of informal group of ministers, headed by Agriculture Minister Sharad Pawar last week.
Banks are wary of giving loans to sugar mills due to their poor financial condition, Kumar said.
"If banks come forward, we will pay the interest accrued on loans from the sugar development fund. There is about Rs 1,200 crore with the SDF.
"Interest would be about Rs 380-400 crore if banks lend about Rs 3,000 crore for two years to the sugar industry against the excise paid by them over the last two sugar seasons," Kumar added.
On raising the duty drawback rates on exports and lowering the period for re-export of imported sugar to three months from 18 months, Kumar said: "These issues are being examined by the Commerce Ministry."
The sugar industry is facing financial problems due to increase in cost of production and sharp fall in domestic sugar prices on account of surplus supplies. The cane arrear had also increased to Rs 3,400 crore last year.
In Uttar Pradesh, the country’s second largest producer, mills have refused to operate as they are unhappy with the high cane price of Rs 280 per quintal fixed by the state for 2013-14 marketing year (October-September).
Mills say they cannot pay more than Rs 225 per quintal. On likely drop in the country's sugar production if crushing gets delayed in UP, Kumar said: "If the logjam continues and crushing gets delayed, obviously, there will be some impact on total sugar production. At this point, I cannot say how much would be the exact impact."
The sugar availability however would be sufficient to meet the domestic demand of about 22 million tonne, he added.
According to Indian Sugar Mills Association (ISMA), the country's total sugar production is estimated at 250 lakh tonne for the 2013-14 marketing year, slightly higher than 245 lakh tonne last year.