Govt mulling soft loans for crisis-ridden sugar mills

NEW DELHI: The government is likely to provide soft loans from the Sugar Development Fund to bail out the sugar industry which is witnessing low prices on account of massive production of the sweetener.

A Group of Ministers, which met here on Wednesday, is understood to have agreed to the proposal of providing concessional finance to sugar mills for meeting their working capital requirements and clearing the arrears of cane growers.

However, the GoM, headed by headed by External Affairs Minister Pranab Mukherjee, is understood to have deferred a decision on excise duty relief to the industry. The Finance Ministry was opposed to providing excise sops to the industry, sources said.

Although senior government officials were tight-lipped about sharing details of the GoM deliberations, sources said the GoM has also agreed to extend the period for incentives for exports.

The Food Ministry has been seeking incentives for the sugar industry to enable mills pay arrear to farmers. The government had in April 2007 announced an export subsidy of Rs 1,350 per tonne to sugar factories located in coastal areas and Rs 1,450 a tonne for those in non-coastal areas for one year covering both 2006-07 and 2007-08 seasons ending October.

Sources said there was no consensus in the GoM meeting on the proposal of bringing sugar under the Central Sales Tax. Inputs from the states would be required before any decision is taken, sources said.