“Mills have been unable to make payment to farmers because of high production and lower domestic prices. Cane arrears have reached Rs 21,000 crore,” Union Minister Nitin Gadkari told reporters after the CCEA meet.
The CCEA decided that the Centre will bear the interest burden of Rs 600 crore from the Sugar Development Fund (SDF).
“The government has sanctioned interest-free loan of Rs 6,000 crore for farmers. Sugar mills will prepare the list of farmers. And on the basis of that, the amount will be directly transferred by banks into the Jan Dhan accounts of farmers,” Gadkari explained.
The loans will be provided to only those units which clear at least 50 per cent of their outstanding arrears before June 30, 2015.
Shares of several sugar companies like Shree Renuka Sugars, Bajaj Hindusthan and Sakthi Sugars surged after the CCEA decision.
This is the second time that the Centre is providing interest-free loan to the cash-strapped sugar mills. In December 2013, the UPA government had given interest-free loans of Rs 6,600 crore to make payments to cane farmers.
In April, the Cabinet had raised the import duty on sugar to 40% in a move to curb imports. It had also removed the 12.36% excise duty on ethanol to pass on price benefits to mills.