Neal Bhai Reports — Sugar Mills Likely to Default on Debt Worth Rs 11000 cr — Several unfavourable moves from the government in terms of capping sugar prices, removal of excise duty exemptions and non-payment of production subsidies etc are set to result in Indian sugar mills staring at defaul . 11,000 crore of debt.ting on ` The repayment schedule for these loans, which were provided by the government two years back in the form of excise duty term loans and soft loans, has started since May this year. Sugar industry representatives and experts foresee lenders declaring these loans turning into non-performing assets, warranting debt restructuring initiatives. In the financial year 2014-15, sugarcane prices crashed due to surplus production since 2013 and huge carry forward stocks hurting millers which led the government to provide soft loans worth ` . 6,000 crore and Sarfesi loan of `. 5,000 crore with interest subvention of 12%.
According to T Sarita Reddy, vice-president, Indian Sugar Mills Association and managing director of Hyderabad-based Gayatri Sugars, “The millers are likely to default on payment of loans, turning (those) into NPAs and might also go for restructuring due to the unfavourable steps taken by the government like putting stock limits on millers, capping of retail prices, increased cess, non-payment of export incentives etc that are stressing our earnings and payment to farmers and clearing of loans would be extremely difficult.“ Millers have been continuously seeing losses as cost of pro . 3,275 per duction for 2013-14 was ` quintal, for 2014-15 and 2015-16, it was ` . 3,300 while the average exmill price was ` . 2,500 and . 2,900, ` . 3,100, respectively.` Meanwhile, the government increased cess by ` . 100 per quintal to . 124 in February this year to create ` a price stabilisation fund as per re commendations by the Commission of Agricultural Costs and Prices (CACP).
The fund was instituted to promote exports by way of production subsidy of ` . 4.50 per quintal and to pay the difference between FRP and realisable sugar price. However, “despite the increased cess being collected that would have accumulated nearly . 2,500 crore till now, it is not being ` put to use and millers are feeling the pinch of paying farmers out of losses. Also, ` . 500 crore of the corpus is yet to be paid to millers who had exported sugar,“ said Sarita.
The millers are also anticipating losses next year as the fair and remunerative prices (FRP) is likely . 250-255 per quintal next to go up to ` year from ` . 230 per quintal now. — Gold Silver Reports