To clear arrears payable to cane farmers; loan can be repaid in 5 years with a moratorium of 2 years

In a major initiative to end the face-off between the sugar industry and farmers, an informal Group of Ministers (GoM) headed by Agriculture Minister Sharad Pawar on Friday recommended a financial package to millers, which includes an interest-free loan of Rs. 7,500 crore to pay off arrears. The loan can be repaid in five years with a moratorium of two years.

According to sources in the industry, the arrears stood at Rs. 5,064 crore in 2012-13.

After a two-hour meeting with invited Chief Ministers of major sugar-growing States, the GoM agreed on interest subvention of 12 per cent on the Rs. 7,500-crore loan. Of this, 5 per cent will be borne by the Centre and 7 per cent will come from the Sugar Development Fund under the Ministry of Food. Each mill can avail itself of a loan under this arrangement equivalent to the average excise duty paid by it.

Other measures include incentives for production of 4 million tonnes of raw sugar, restructuring of loans as per the Reserve Bank of India guidelines and doubling of ethanol blending in petrol to 10 per cent. An inter-departmental panel will be set up to coordinate with oil marketing companies and sugar mills for ethanol blending.

For now, there will be no increase in duty on sugar imports.

On the millers’ demand for the creation of a buffer stock on government account, the Finance Ministry would come up on the financial burden this would create on the exchequer. The States have been asked to examine different modalities for sugarcane pricing, including the revenue-sharing model (suggested by the C. Rangarajan panel), Mr. Pawar told journalists after the meeting.

“Our effort is to help both, the farmers and the industry,” he said adding that the crushing of sugarcane had begun in all parts of the country.

The recommendations will be placed before the Union Cabinet for approval.

Finance Minister P. Chidambaram, Petroleum Minister M. Veerappa Moily, Civil Aviation Minister Ajit Singh and Food Minister K.V. Thomas were present. The Chief Ministers of Karnataka (Siddaramaiah), Maharashtra (Prithviraj Chavan) and Uttar Pradesh (Akhilesh Yadav) participated in the meeting, while Tamil Nadu was represented by Chief Secretary Sheela Balakrishnan.

Coming out of the meeting, Mr. Yadav and Mr. Siddaramaiah said: “Some measures are being worked out,” and Mr. Chavan pointed out that “it is a process.”

The industry, represented by the Indian Sugar Mills Association (ISMA), welcomed the initiatives, saying it will help in clearing the cane arrears. “The proposed measures will also help the industry venture into production of new product ‘raw sugar’ and grab opportunities whenever they are available,” ISMA Director-General Abhinash Verma said.

In the last few weeks, millers had declined to crush cane in the ongoing season, saying it was financially unviable for them to do so. They cited higher production of sugar and decline in sugar price as the reasons for their agony. Farmers, on the other hand, sought higher cane price over last year as input costs had gone up, leading to the formation of the GoM by the Prime Minister to resolve the matter.