Sugar industry seeks debt restructuring, loans rescheduling
Reeling under a huge debt burden of Rs 50,000 crore, the sugar industry on Wednesday asked the government to restructure debt and extend interest subvention on soft loans for another three years.
A representation in this regard has been made to the PMO as well as Finance Minister Arun Jaitley recently by both private and cooperative sugar mills bodies -- Indian Sugar Mills Association (ISMA) and National Federation of Cooperative Sugar Factories.
On Tuesday, a delegation-led by NCP chief and former agriculture minister Sharad Pawar met Jaitley and discussed the issue in detail.
"In addition to the industry's requests for financial restructuring and re-schedulement of repayment of loans, the ethanol blending programme was also discussed. It was submitted that ethanol prices should be restored at last year's level and the benefit of excise duty waiver should be reconsidered and passed on to ethanol manufacturers," ISMA said in a statement.
In a separate meeting with the Finance Minister, ISMA President informed the government that the sugar industry is "still not fully out of its problems".
ISMA submitted that "the government and RBI should slightly modify the threshold limit under the S4A scheme of debt restructuring from Rs 500 crore to Rs 100 crore.
ISMA also requested for re-schedulement of repayment of loans taken under the Scheme for Extending Financial Assistance to Sugar Undertaking (SEFASU) and soft-loans, and extension of interest subvention on soft loan for another three years.
The sugar mills have borrowed Rs 10,000 crore loans from banks under these two schemes to pay cane price to growers.
With some positive steps taken by the government in last year, ISMA said that sugar prices started improving from April 2016 and allowed the industry to just about cover the cost of production.
"However, the extra borrowing in the last few years has seen the debt burden jump by almost 4 times to around Rs 50,000 crore currently," ISMA said.
Despite improvement in sugar prices, it is still not sufficient to enable the industry to service all its debt at the same time. Also, cost of production of sugar this year is higher by Rs 2 per kg when compared to last year. Moreover, Rs 10,000 crore of loans taken to pay cane price of farmers under two schemes are due from the current season, it noted.
ISMA said it expects sugar prices to be "stable" next year. There would be adequate sugar to meet the domestic demand and there would not be necessity to import.