India extends moratorium by six months on Rs 15,000 crore soft loan to sugar mills


As the Rs 15,000 crore soft loan scheme for sugar mills is moving at a snail’s pace, the government has extended the moratorium period for repayments by six more months, according to sources. Now, the moratorium period is one-and-a-half years. A moratorium period is a time during the loan term when the borrower is not required to make any repayment.

The Centre had announced the loan package in two tranches — first in June 2018 amounting to Rs 4,440 crore and the other in March 2019 of Rs 10,540 crore. The objective was to help millers in clearing cane arrears and divert surplus sugar for ethanol manufacturing. A soft loan is a loan that is given at a subsidised interest rate. “When the soft loan scheme was launched to augment ethanol production in the country, one year moratorium was provided. This has now been extended to 1.5 years in the interest of sugar mills and farmers,” says a Financial Express report.

Of the 418 applications for the loan, the food ministry has found 282 eligible. Of this, 114 applications have been cleared for loans amounting to Rs 6,139.08 crore, as per official data. However, banks have sanctioned the loan to 45 applicants and disbursed Rs 900 crore to 33 applicants till September-end, the data showed.

The soft loan package is being implemented by the food ministry, which provides a list of eligible loan applicants to banks for further process.

According to industry experts, only 5-6 per cent of the total soft loan amount of Rs 15,000 crore announced under the scheme has been disbursed so far by banks. The sugar industry is of the view that much of the time is being wasted in the first screening at the ministry level. Ideally, banks should check the eligibility criteria and sanction the loan amount accordingly. The soft loan was announced to improve liquidity of mills, reduce sugar inventory and facilitate timely clearance of cane dues of farmers.

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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