India Markets closed

Pune: Centre’s soft loan scheme fails to help mills as cooperative banks can’t extend any more credit

Partha Sarathi Biswas
Mills are grappling with cane dues and low sugar prices. (Express photo)

The Rs 2,500-crore soft loan scheme for sugar mills, aimed to help them clear their dues, has failed to find too many takers due to some basic hurdles in the process. While 110 mills in the state are eligible for the soft loan, any actual disbursal of money is yet to take place.

The scheme, announced by the Centre in February, allows the mills to avail of loans at 7-10 per cent interest rate for a year. It is meant to help sugar mills clear their dues to cane growers, which have run into thousands of crores.

By the end of March 2019, mills in the state owed cane growers Rs 4,600 crore, due to the low price of sugar and lack of liquidity with the mills.

According to officials of the sugar commissionerate, the Maharashtra State Cooperative (MSC) Bank, the apex cooperative bank in the state, was in no position to extend further credit to the mills as it had already extended several 'pledge loans' to the sector.

Mills 'pledge' their sugar stock to cooperative banks to avail credit, which they use to pay cane growers as well as for other expenses such as salaries of employees and procurement of requisite items like gunny bags.

The apex bank deals with 51 sugar mills in the state and the pledge loan given to the sector is estimated to be about Rs 3,600 crore – the limit set by the Reserve Bank of India as the maximum 'exposure limit' for sugar sector. A sugar commissionerate official pointed out that even if the bank wanted to, it would not be able to provide further credit to the mills. Many of the mills have also exhausted their credit limit and will not be eligible for more loans.

While the national banks are in a better position to offer loans to sugar mills, they are reluctant to do so, given the crisis in the sector.

Sanjay Khatal, managing director of the Maharashtra State Cooperative Sugar Factories Federation, has sent a letter to the Department of Food and Civil Supplies. highlighting the issues. In the letter, Khatal has sought relaxation of norms so that the mills are able to avail further credit.