NEW DELHI: The Central government is planning a second tranche of soft loans to the tune of Rs 7,500 crore for sugar mills, in a bid to boost their ethanol production capacities.
The government had announced soft loans worth Rs 4,400 crore last year, as well as provided an interest subvention of Rs 1,332 crore to the sugar mills over a period of five years, including a moratorium of one year.
However, the industry had maintained that this was not enough. The Centre is said to have received 144 applications requesting soft loans to the tune of Rs 12,785 crore. Not all the requests qualified, as per the guideline. “The decision is due for the long time. The Cabinet is likely to consider the request to release Rs 7,500 crore worth soft loans dedicated for the expansion of their ethanol capacity,” said a senior finance ministry official.
According to him, the subsidy burden for the balance loan amount would be Rs 1,600 crore. A proposal, seeking amendment of rules to allow even grain-based distilleries take the benefits, is being prepared.
The official added that the loan would also be extended to non-molasses-based distilleries. Currently, only molasses-based distilleries are allowed under the scheme. The entry of standard distilleries, if allowed, will help diversion of more cane during surplus seasons.
The government will also weigh options on increasing the interest subvention by 6 per cent to set up new distilleries. “While the MSP (Minimum Support Price) remains below the cost of production of around Rs 34 per kg for Uttar Pradesh and Rs 33 per kg for Maharashtra, realisations from allied segments such as distillery and cogen will continue to be the key profit drivers for integrated sugar mills,” India Ratings and Research said in its latest report.
The report said that the sector outlook remains negative for non-integrated sugar firms on account of the high carry-over stock from last season, surplus production in the current season and weak international prices. However, integrated sugar companies with alternative revenue streams from ethanol and power would be better placed, it said.