New Delhi: The Cabinet on Wednesday approved a Rs 7,000-crore bailout package and set the minimum selling price for sugar at Rs 29 per kg to support the struggling sector, a Union Minister said.
"In order to remove the problem of liquidity of sugar mills resulting in accumulation of huge cane price arrears of farmers, the Union Cabinet chaired by Prime Minister Narendra Modi has approved ... measures involving total amount of about Rs 7,000 crore," Union Minister for Law, Justice and IT Ravi Shankar Prasad said.
The decision of Cabinet Committee on Economic Affairs (CCEA) comes as excess production in the current sugar season has depressed its market price, adversely affecting the liquidity position of sugar mills leading to accumulation of Rs 22,000-crore dues to the farmers.
The package comprises Rs 1,175 crore for creating a 30 lakh MT buffer stock, Rs 4,440 crore as soft loan for mill owners to increase ethanol production capacity to divert surplus sugarcane and Rs 1,332 crore towards interest subvention for the loan, the Cabinet said in a note.
"...government will bear interest subvention of maximum Rs 1,332 crore over a period of five years including moratorium period of one year on estimated bank loan amounting to Rs 4,440 crore to be sanctioned to the sugar mills by the banks over a period of three years," it said.