Executive Summary:
This notification outlines a scheme for extending soft loans to sugar mills to facilitate the payment of cane dues to farmers for the sugar season 2018-19. The loans will assist in clearing cane price arrears based on the Fair and Remunerative Price (FRP) fixed by the Central Government. Loans must be disbursed by May 31, 2019, to be covered under the interest subvention scheme.
Key Points / Main Content:
* **Purpose of Loan:**
* To pay cane price arrears of farmers for the sugar season 2018-19 related to the FRP of sugarcane.
* **Modalities and Extent of Loan:**
* Banks will provide soft loans to sugar mills after due diligence.
* The loan amount will be equivalent to 85% of the stock value of 40 Lakh MT at Rs. 31000 per MT, with a maximum loan amount of approximately Rs. 10540 crore.
* Sugar mills must have cleared at least 25% of the cane price payable for the current sugar season 2018-19, calculated on the basis of FRP as on 28.02.2019 to be eligible.
* Loans are subject to relevant banking norms and RBI restructuring guidelines.
* Loans must be backed by security and collateral, including personal guarantees.
* NPA units are covered if the State Government provides a guarantee.
* The loan amount is determined by 10.55% of the reported white sugar production in the 2017-18 season and the mill must have undertaken sugar production in both 2017-18 and 2018-19.
* Sugar mills must furnish certificates from the sugarcane commissioner relating to white sugar production during 2017-18 and certifying that the mill undertook sugar production in both seasons.
* Sugar mills must furnish a certificate from the sugarcane commissioner indicating that they have cleared at least 25% of the cane price payable on the basis of FRP for the 2018-19 season as of 28.02.2019.
* Banks will directly remit funds into the accounts of farmers based on lists provided by the sugar mills.
* The loan amount will be apportioned on a pro-rata basis according to outstanding arrears.
* Loans must be sanctioned and disbursed by May 31, 2019, to be covered under the interest subvention scheme.
* The Department of Financial Services (DFS) will issue instructions to banks to operationalize the scheme.
* **Extent of Interest Subvention:**
* The government will bear interest, subvention at 7% simple interest or the actual rate charged by the bank, whichever is less, for a maximum of one year.
* Sugar mills are responsible for repaying the loan and interest after one year.
* Failure to submit a utilization certificate will result in the loss of interest subvention benefits.
* Prepayment during the one-year period commencing from June 1, 2019, will be considered, and the interest subvention liability will be reduced accordingly.
* **Modalities of Payment of Interest Subvention:**
* The Department of Food and Public Distribution (DFPD) will release the interest subvention amount quarterly in advance to the nodal bank.
* The amount will be released as an advance subject to furnishing disbursement particulars and interest earned.
* Funds released for interest subvention shall be parked in interest-bearing accounts.
* Expenditure will be met from the Consolidated Fund of India (CFI).
* **Utilization Certificate:**
* Sugar mills must submit a utilization certificate countersigned by the sugarcane commissioner.
* The State sugarcane commissioner shall monitor the utilization of the loan.
* **Modification Clause:**
* The Central Government may relax or modify the provisions of this Scheme if deemed necessary.
Impact Analysis:
* **Sugar Mills:**
* *Impact:* Access to soft loans to pay cane dues to farmers, potentially improving their financial stability and operations.
* *Action Required:* Apply for loans from banks, meet eligibility criteria, furnish necessary certificates, provide lists of farmers with bank details, ensure loan utilization for cane payments, and submit utilization certificates.
* **Farmers:**
* *Impact:* Receiving pending cane dues, improving their financial situation.
* *Action Required:* Ensure bank account details are accurate and provided to the sugar mill.
* **Banks:**
* *Impact:* Providing soft loans to sugar mills, managing loan disbursements, and receiving interest subvention from the government.
* *Action Required:* Conduct due diligence on sugar mill applications, provide loans, remit funds to farmers' accounts, operationalize the scheme according to DFS instructions, and manage interest subvention.
* **State Sugarcane Commissioners:**
* *Impact:* Monitoring the utilization of loans by sugar mills and providing necessary certificates.
* *Action Required:* Provide certificates related to sugar production and cane price payments, monitor loan utilization, and countersign utilization certificates.
* **Department of Food and Public Distribution (DFPD):**
* *Impact:* Releasing interest subvention amounts and overseeing the scheme.
* *Action Required:* Release interest subvention amounts quarterly in advance to the nodal bank.
* **Department of Financial Services (DFS):**
* *Impact:* Providing instructions to the banks to operationalize the scheme, including the appointment of a nodal bank.
* *Action Required:* Issue suitable instructions to the banks to operationalize the scheme, including the appointment of a nodal bank.
Key Entities Referenced
Ministry of Consumer Affairs, Food and Public Distribution: The Union ministry responsible for consumer affairs, food, and public distribution in India.
Department of Food and Public Distribution: The department within the Ministry of Consumer Affairs, Food and Public Distribution responsible for food and public distribution policies.
New Delhi: The location where the notification was issued; the capital of India.
Fair and Remunerative Price: The price of sugarcane fixed by the Central Government that sugar mills must pay to farmers.
RBI: Reserve Bank of India, the central bank of India.
State Government: The government of a specific state within India.
Department of Financial Services: The department that will issue instructions to banks to operationalise the scheme.
Consolidated Fund of India: The fund from which the expenditure on interest subvention would be met.
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सुरेश कुमार विशq, संयु6 सिचव
MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION
(Department of Food and Public Distribution)
NOTIFICATION
New Delhi, the 2nd March, 2019
No. 1(4)/2019-S.P.-I.— The Central Government, with a view to facilitate payment of cane dues of the farmers
for the current sugar season 2018-19 hereby notifies the scheme for extending soft loan to sugar mills as under:
1. Purpose of loan: The loan is to be used for payment of cane price arrears of farmers for the sugar season 2018-
19 relating to the Fair and Remunerative Price (FRP) of sugarcane fixed by the Central Government for that sugar
season.
2. Modalities and Extent of loan:
(i) The banks will provide, after due diligence, soft loan to sugar mills to facilitate payment of cane dues
of farmers for the current sugar season 2018-19 equivalent to 85% of stock value of 40 Lakh MT @ Rs. 31000/-
per MT. The maximum loan that can be advanced under the scheme shall be about Rs.10540 crore.
(ii) The Bank will consider the loan application of only those sugar mills which would have cleared at least
25% of the cane price payable for current sugar season 2018 –19 calculated on the basis of FRP as on
28-02-2019.
(iii) The lending will be subject to all relevant banking norms including restructuring guidelines as notified
by RBI for the sugar industry from time to time. The loans will be backed by security and collateral of the sugar
mill availing the loan including personal guarantees and other assets of promoters which are free from
encumbrances to be decided by the individual banks.
(iv) The NPA units are also covered under the scheme provided the State Government concerned gives
guarantee for their new loans.
(v) The mill-wise quantum of soft loan shall be determined by taking into account 10.55 % of their
reported production of white sugar in sugar season 2017-18 and this loan will be available to those mills which
have undertaken sugar production in the sugar seasons 2017-18 and 2018-19.4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART I—SEC. I]
(vi) The sugar mills shall furnish to the banks a certificate from respective sugar/cane commissioner
relating to the quantity of white sugar production during sugar season 2017-18 and certifying that the mill has
undertaken sugar production in the sugar seasons 2017-18 and 2018-19.
(vii) The sugar mills shall also furnish to the banks a certificate from respective sugar/cane commissioner
indicating that the mill has cleared at least 25% of the cane price payable on the basis of FRP for current sugar
season 2018-19 as on 28. 02.2019.
(viii) Once the loan is sanctioned and necessary formalities for disbursal are completed, the Bank will obtain
from the respective sugar mill the list of farmers along with bank account details, borrowable account numbers
of farmers who have availed credit facility from the banking system, and regular saving bank or current account
numbers in respect of farmers who have not availed any credit facility, and the extent of cane dues to be paid
computed on the basis of FRP and shall directly remit the funds allocated into the accounts of farmers on behalf
of the sugar mill.
(ix) The loan amount available to a sugar mill shall be apportioned on a pro-rata basis in accordance with
outstanding arrears of the farmers whose dues are pending with the mill.
(x) All loans which are sanctioned and disbursed by 31st May, 2019 by the lending banks, pursuant to this
notification, would be covered under the interest subvention scheme.
(xi) The Department of Financial Services (DFS) will issue suitable instructions to the banks to
operationalise the scheme including appointment of a nodal bank.
3. Extent of Interest Subvention:
(i) The Government will bear interest burden by way of interest subvention @ 7% simple interest or actual
rate of interest charged by the bank, whichever is less for maximum of one year from the date of disbursement
of the loan. Thereafter, sugar mills will be responsible for repaying the loan advanced by the banks under this
scheme along with the interest amount.
(ii) If a sugar mill fails to submit the utilization certificate, the benefit of interest subvention will not be
available as long as the utilisation certificate is not submitted by the mill.
(iii) Pre-payment during the period of one year commencing from 1st June, 2019, will be considered to be
decided by the bank and the interest subvention liability of DFPD towards loan account would accordingly get
reduced.
4. Modalities of payment of interest subvention amount by Central Government:
(i) The Department of Food and Public Distribution (DFPD) will release the interest subvention amount
on quarterly basis in advance to the nodal bank as appointed by DFS.
(ii) The amount shall be released as advance subject to furnishing of disbursement particulars as well as
interest earned by the bank on the amount released in the previous quarter. The interest earned on the subvention
advance shall be adjusted in the quarterly instalments from 2nd quarter onwards.
(iii) Funds released by DFPD in advance towards interest subvention shall be parked in interest bearing
accounts so that interest is accrued on this amount for the entire period commencing from the date of its release
and till it is credited into the account of the respective sugar mills.
(iv) The expenditure on interest subvention would be entirely met from Consolidated Fund of India (CFI).
5. Utilization certificate:
The sugar mill concerned shall submit utilization certificate duly counter-signed by the respective sugar/cane
commissioner certifying that the loan amount has been utilized for the purpose specified in the scheme. The State sugar/
cane commissioner shall also monitor the utilization of the loan.
6. Where the Central Government is of the opinion that it is necessary or expedient to do so, it may, relax / modify
any of the provisions of this Scheme.
SURESH KUMAR VASHISHTH, Jt. Secy.
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and Published by the Controller of Publications, Delhi-110054.