Interest rate on SDF loans increases to 7.5% from earlier 4%

The Food Ministry has increased the interest rate on loans provided to sugar factories from the Sugar Development Fund (SDF) to 7.5 per cent, from 4 per cent earlier, following RBI's decision to hike bank rate.

The Fund is utilised to provide loans at concessional rates to sugar factories for sugarcane development, modernisation, co-generation and ethanol projects.

In a circular to sugar industry bodies, Food Ministry said the interest rate on SDF loans shall be 7.5 per cent per annum with effect from February 14, 2012.

The interest rate has been increased following Reserve Bank of India's decision on February 13 to hike the Bank Rate to 9.5 per cent per annum from 6 per cent per annum, it added.

"As Food Ministry provides SDF loans at 2 per cent less than the prevailing bank rate, the interest rate has been revised to 7.5 per cent per annum (2 per cent less than bank rate of 9.5 per cent)," the circular said.

Since 2003-04 fiscal, the government has sanctioned Rs 4,172.20 crore loans from SDF and out of that Rs 3,176.03 crore has been disbursed.

The Sugar Cess Act provides that an excise duty not exceeding Rs 25 per quintal of sugar shall be levied and collected as cess for SDF. At present the cess levied is at a rate of Rs 24 per quintal of sugar.