Sugar mills in India will get 60 billion rupees ($940 million) in interest-free loans from banks to help them partly clear dues to cane farmers. Sugar stocks surged.
The cabinet approved the financial assistance in New Delhi on Wednesday as the mills owe about 210 billion rupees to farmers, Road Transport Minister Nitin Gadkari told reporters.
Mills’ debt to growers mounted as the price of sugar they sell in the local market doesn’t cover the raw material costs and as production surged to an eight-year high. This is the second time the government is extending free loans to mills since 2014 after measures including higher import duties and export subsidies failed to boost prices.
“This is a decision taken in the interest of the farmers and not the industry,” Gadkari said. “Money will go directly into the accounts of the farmers.”
Shares of sugar makers including Bajaj Hindusthan Sugar Ltd., Balrampur Chini Mills Ltd. and Shree Renuka Sugars Ltd. climbed in Mumbai on Wednesday. Bajaj Hindusthan rallied 11 percent to 14.65 rupees, Balrampur jumped 2.3 percent to 41.80 rupees, while Shree Renuka advanced 7.9 percent to 10.90 rupees.
The government will bear the interest of loans paid to the mills for only one year and has yet to take a decision on stockpiling sugar to remove the surplus from the open market as demanded by the industry, Gadkari said.
The loans will provide little relief to an industry overwhelmed by a glut and stockpiling of about 3 million tons of the sweeteners may have helped reduce surplus and improve prices, Abinash Verma, director general of the Indian Sugar Mills Association, said in an e-mailed statement on June 10.