Modi Government May Soon Announce another Relief Package for Sugar Companies

The Narendra Modi-led-BJP government is considering another relief package for the sugar companies. According to government sources, this one could be double the size of the one announced in September last year.

The new relief package is said to entail the central government facilitating loans worth Rs 12,000 crore for which the ex-chequer will bear 5 to 6 percent interest subvention for 5 years. The loans will be provided to improve ethanol production, a government officer said. He added that the package is being finalised by the PMO, Finance Ministry, Food Ministry and Agriculture Ministry. However the impact on the fisc is yet to be estimated.

It is important to mention that these bribes could be announced in January itself, before Finance Minister presents the interim Union Budget. The official also said, "Efforts are in progress for this sugar package to be discussed and approved at the next Cabinet meeting”.

In September 2018, similar loans worth Rs 6,139 crores were facilitated to the sugar mills for higher ethanol production. Since then, the industry is making representations that this is not sufficient to lessen the pain from depressed sugar prices and a supply surplus in the system. This could be a trigger for incumbent government to bring in a bigger relief package before the General Elections.

The official also said, "We got 282 proposals from the sugar mills when the package was announced last year in September. But it was possible to sanction only 114 at that point in time with the funds provided. Hence many more mills and distilleries stand to benefit”.

In addition to helping the debt-ridden sugar firms - with mills struggling to clear due arrears to cane farmers - the relief package is being seen as one of the ways to lessen India's capacity for crude imports. Moreover, the Agriculture Ministry is pitching the relief package as an environmentally friendly move.