The Hindu Business Line : Sugar mills to be given interest-free loans against excise payments

Home Page - Agricultural Policy
Agri-Biz & Commodities - Sugar
Money & Banking - Credit Market
Sugar mills to be given interest-free loans against excise payments

Money to be used for making cane payments

Sweet sops
The interest liability on these five-year tenor loans would be borne by the Centre.
Even if the proposal goes through, the implementation may take some time.
Millers complain that sops announced in April have not reached them yet.

Harish Damodaran

New Delhi, Sept. 25 The Union Cabinet is set to approve a proposal to allow sugar mills to access interest-free loans from banks against their excise payments during the 2006-07 and 2007-08 seasons (October-September).

“The proposal, which has already been approved by the Group of Ministers (GoM) under Mr Pranab Mukherjee, is slated to be taken up by the Cabinet in its Thursday meeting,” officials told Business Line. The present proposal is a variant of an earlier one that had sought to permit mills to defer payment of excise for the two seasons.

The Finance Ministry had, however, rejected the idea of an excise deferral or retention of proceeds by mills, as it would set a precedent and lead to similar demands from other industries.

What is being mooted now is that the mills discharge their excise liabilities as before. At the same time, against the excise paid, they would be entitled to borrow an equivalent amount from banks, which is to be used exclusively for making cane payments.

Interest liability

“The interest liability on these five-year tenor loans would be borne by the Centre. The mills will have to repay the loans from the 2008-09 season. That makes it similar to a five-year loan with a two year repayment moratorium,” the officials explained.

Currently, mills pay an excise duty of Rs 71 a quintal on free sale sugar and Rs 38 a quintal on levy sugar.

Taking an excisable production of 25 million tonnes and a 90:10 free sale-levy ratio, mills can borrow roughly Rs 1,700 crore a year.

Even if the proposal goes through, the implementation may take some time, as it would require making a factory-wise assessment of excise duty realisation. In addition, there is the general problem of bureaucratic procedural delays.

The Centre had earlier announced other sops for the industry, including the creation of a 50 lakh tonnes buffer (involving an outgo of nearly Rs 950 crore from the Sugar Development Fund) and subsidy reimbursement of Rs 1,350-1,450 per tonne on exports.

Millers’ complaint

“Although the announcements were made in April, we have till date not received a single rupee either as buffer claims or on the export subsidy front. They are yet to even come out with the operative orders for mills to forward their claim,” a miller complained.

Related Stories:
Sugar mills unlikely to get fresh credit from banks
Create fund for sugar industry, RBI tells banks

More Stories on : Agricultural Policy | Sugar | Credit Market | Excise and Customs

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page