The Punjab government will help private sugar mills raise Rs 207-crore in interest free loans for three years so that they are able to pay off sugarcane farmers.
A committee led by chief secretary Sarvesh Kaushal stated in recommendation to chief minister Parkash Singh Badal on Tuesday that the state government would even pay the Rs 60-crore interest on these loans. The mills will repay the loans in seven years and start paying interest after three years. The cabinet will take a decision on the recommendations on September 10. Phagwara’s Jarnail Singh Wahid, president of an association of private sugar mill owners, said “the recommendations have saved farmers, sugar mills, and also the image of the state government”.
Last month, the owners of six private mills in the state had threatened not to operate the units in the sugarcane-crushing season starting from November. Relaxed after the committee’s recommendations, they are reported to have started booking sugarcane for their enterprises. Claiming that their business had become unviable by the cost of sugar being less than its raw material (sugarcane), they had asked the state government for support.
The threat to shut the mills put the government into worry, since private mills do two-third of sugarcane crushing in the state, with mine co-operative mills doing the rest. The committee that has suggested a bailout formula for private mills comprises financial commissioners of co-operation, development and excise and taxation, besides the principal secretary (finance). It was formed on September 1, and as required, has submitted its report in a week.
The payment has to be made by September 30, into farmers’ bank accounts directly. It will not be routed through private mills who owe the farmers. The committee has drawn out a proposal for supporting private sugar mills so farmers get their due. It has linked the formula with the expected sugar price in the crushing season, believing that more the sugar price, lesser will be the subsidy. The government has not changed the state advised price (SAP) of Rs 295 per quintal for sugarcane, which was effective in the previous year also. “It is wise to link the sugarcane price with sugar,” said sugar mill owner Wahid.
The committee was of the opinion that paying Rs 60 crore interest on loans offered to the private sugar mills was a lot cheaper than paying almost Rs 750 crore subsidy to the co-operative mills for crushing in case the former shut down. Already out of Rs 295 per quintal sugarcane cost, the government is paying farmers Rs 177 to support co-operative mills. “The more sugarcane these mills crush, the higher will be the burden on the government,” said an officer, justifying the committee’s recommendations. The subsidy plan proposed for the private mills requires the government to shell out Rs 20 to 80 crore depending on the sugar cost. Of Rs 540 crore that co-operative mills owe farmers, the government paid `330 crore, while the former paid only Rs 210 crore.