Sugar mills' rescue package cleared

BS Reporter  |  New Delhi  

December 27, 2013 Last Updated at 00:48 IST

The CCEA cleared the modalities for implementing the earlier decision on a Rs 6,600-crore interest-free loan package for sugar mills

The Union Cabinet and its empowered arm, the Cabinet Committee on Economic Affairs (CCEA), met separately on Thursday to clear a number of decisions.

The CCEA cleared the modalities for implementing the earlier decision on a Rs 6,600-crore interest-free loan package forsugar mills. A senior official said the loans would be disbursed through a separate bank account to ensure the utilisation was monitored. A nodal bank would also be appointed for this.

The interest burden, estimated at Rs 2,750 crore over the next five years, will be borne by the government from the Sugar Development Fund. The loans will be provided by banks exclusively for making payment to sugarcane farmers, including arrears. The loans would be equivalent to the excise duty, cess and surcharge on sugar paid by the mills in the past three years.   

Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years. “No interest subvention (is) to be provided for the period of default in the principal repayments,” an official statement said. Loans will be given to mills functional during the 2013-14 season (October-September).   

Those with loans classified as non-performing assets by the banks will also be eligible, provided the state governments concerned give a guarantee. All loans sanctioned by June 30, 2014 ,and disbursed by September 30, 2014, by the lending banks would be covered under the interest subvention facility.

The lending will be subject to the various norms on scrutiny, future cash flows of five years, establishing the viability and debt servicing capacity, including the restructuring guidelines, as notified for the sugar industry from time to time. The loans will be backed by security and collateral of the unit availing it, including personal guarantees and other assets of promoters which are free from encumbrances.    

The Rs 80,000-crore sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices, in the wake of surplus output over the past few years.  Providing interest-free loans was one recommendation of the group of ministers set up by the Prime Minister under the chairmanship of Agriculture Minister Sharad Pawar to address the industry's cash crunch.

SFCI to merge with  National Seeds Corporation

The Cabinet cleared a proposal to amalgamate State Farms Corporation of India (SFCI) with National Seeds Corporation (NSC), both wholly owned public sector undertakings. The amalgamated entity will serve the interest of the farmers and the changing requirements of the Indian agricultural sector in a more effective way.

The would help in achieving a goal to provide quality, affordable seeds to every farmer even in the remotest parts of the country. This effort will ensure last mile availability of seeds at economical price for a large number of subsistence farmers in India, an official statement said.

With the present growth rates, profitability and synergy, the combined turnover of the two companies would increase from the present Rs.1180 crore to Rs 2,046 crore by 2017 and Rs 3,112 crore by the year 2020. The merged entity is expected to occupy the prime position in the Indian seed industry by year 2020.

Pension proposal for MTNL employees      

The Cabinet approved a pension proposal for 43,000 MTNL employees, who joined the public sector company from Department of Telecom, that would cost the government an estimated Rs 500 crore annually.      The decision is likely to bring additional amount of about Rs 1,500 crore (including interest) in the books of MTNL as refund from government for the pension that the PSU paid to its employees.      

Sick PSUs to be given Rs 116 cr for wage payments

CCEA cleared a proposal in this regard. PSUs will inclulde Hindustan Machine Tools (HMT). "CCEA approved the proposal for providing non-plan budgetary support of Rs 116.86 crore for liquidation of statutory dues (Provident Fund, Gratuity, Pension, Employees State Insurance and Bonus) and salary and wages from 01-04-2013 to 31-08-2013 in respect of 11 Central Public Sector Enterprises," an official statement said.      

Other PSUs which will get this fund are-- Hindustan Cables, HMT (Watches), HMT (Chinar Watches), Nagaland Pulp & Paper, Triveni Structurals, Tungbhadra Steel Products, Nepa Ltd, HMT Bearings, Hindustan Photo Films and Tyre Corporation of India, it said.     

Other decisions:

i) To set up National Cancer Institute at a cost of Rs 2,035 crore in the Jhajjar (Haryanna) campus of All India Institute of Medical Sciences (AIIMS).  New Delhi located in Badhsa village, Jhajjar, Haryana.

ii) A Rs 640 crore welfare scheme for fishermen. The scheme, to be implemented in the 12th five year plan (till March 31, 2017), will provide basic amenities like drinking water and sanitation in fishers' villages among other things.

Sugar Sector : Not so sweet anymore

Sources:;Bs/Vishal Chhabria & Sunaina Vasudev / Mumbai March 13, 2010, 0:44 IST

Analysts see a probable
 down cycle for the Sugar.
The sharp downswing in international and domestic
sugar prices in the last couple of weeks has soured the
performance of sugar stocks, and it may get worse as
analysts call a probable down cycle for the commodity.

With sugar production expected to rise globally and domestically,
the price of refined sugar has dipped 20 per cent to around $590
per tonne in the international market after touching a 25-year high
of $740 per tonne this year, propelled by a 10-million tonne (MT)
demand-supply deficit. Additionally, analysts say that announcements
of India and other importers like Egypt deferring purchases, even as
an improving 2010-11 supply outlook will narrow the deficit considerably
(subject to normal weather patterns), have also impacted prices.

Domestic sugar prices are down over 20 per cent from peak
levels in January 2010, partly because of an upward revision
in production estimates for the current sugar season ending
September 2010 and also because of tight inventory restrictions
imposed by the government on buyers and changes in release norms
(from monthly to weekly) for free sale sugar.

Indian production for the 2009-10 season is expected to be
around 16.8 MT according to Indian Sugar Mills Association,
against its earlier estimates of 15 MT; however, analysts expect
it to be around 15.5 MT. By March-end though, more accurate
production numbers will be available to gauge the net additional
sugar imports by India (estimates peg it at about 2 MT), which
will have to be concluded in the next one or two months.

For 2010-11, production is expected to jump 40 per cent in
India, according to a Morgan Stanley report, to 23.5 MT matching
consumption levels.

Meanwhile, Brazil has had a good cane crop as well.
There may be 10 per cent year-on-year increase in sugar
production (about 4 MT) in 2009-10 (ending May) according
to a Rabo Bank report. This has set the stage for a softening in prices.

However, a CLSA analyst notes in a recent report that their discussions
with industry participants suggest ethanol exports from
Brazil could also rise significantly if crude oil prices were to
stay above $85 a barrel. It further says strong crude oil prices and
the recent fall in sugar price have improved the relative attractiveness
of ethanol, and this may limit the increase in Brazilian sugar production.

Meanwhile, sugar stocks have fallen by about 15 per cent
on average in the last month and are expected to fall further,
given the near-universal downgrades. Individual stock performance
would vary due to the diversified revenue streams (sugar, power generation)
and the margin impact of raw sugar imported at higher prices earlier in the year.

However, higher cane costs paid to farmers when sugar prices
earlier this year were sky-high would pinch margins
of all companies, going ahead.

Bajaj Hindusthan and Shree Renuka would face closer investor
scrutiny as debt levels go up, even as cash flows slow because of lower prices.

Balrampur Chini may bottom out sooner given its healthier
cash flow outlook, led by an expected increase in
co-generation revenues, which will also allow it to reduce leverage levels.

Triveni Engineering, however, has held up, well powered
by its successful engineering business.




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Banks cautious on further lending to sugar companies

Sources:BS/Ajay Modi / New Delhi March 18, 2010, 0:24 IST

Banks have become more cautious in lending to sugar 

companies following a sharp fall in prices and are

working on a fresh set of borrowing limits based on 

lower valuations. Companies borrow against sugar

stocks to pay sugarcane farmers.

In January, a number of companies got advances against a valuation of Rs 3,600 a quintal for their sugar inventories. While granting limits to sugar companies, banks take into account the previous three-month average price or the current price, whichever is lower. However, banks are now adjusting the drawing limits to the current sugar price of Rs 3,100 a quintal, says an industry source. Consequently, the drawing limit of companies has come down by nearly 14 per cent.

“We are facing working capital problems. While sugar realisation is low, we are still paying Rs 260 a quintal for sugarcane. We apprehend that some sugarcane payment arrears will build up if sugar prices do not improve. This would adversely affect the farming community and sugarcane acreage might not increase significantly. This would again lead to import dependence in the sector,” said an official of a Uttar Pradesh-based sugar major.

Most sugar companies claim that the cost of sugar production — considering the existing rate of sugarcane at Rs 260 a quintal and a 20 per cent levy of sugar at Rs 1,300-1,400 a quintal — is Rs 3,600 a quintal.

Banks allow companies to draw 85 per cent of the total value of sugar meant for open market sale. However, for 20 per cent of the sugar (which is sold to government for levy at a fixed price), companies can draw 90 per cent of the total value. “We have elaborate norms for lending to sugar companies and the adjustments are done keeping in view such norms,” said an executive with a nationalised bank.

On actual sale of sugar, companies repay the amount to 

banks on a regular basis. Banks, on their part adjust the

limits on a weekly basis and companies are required to submit a

weekly statement of stocks to the banks.

Ex-mill sugar prices had touched a record
high of Rs 4,300 a quintal in January.

Prices, however, started softening towards the
end of January and continued to decline in
February following government initiatives — like
weekly sale mechanism and stockholding limits —
and a decline in international prices.

However, companies continue to pay the same price
to farmers as they were paying in January. Moreover,
with extended crushing in states like Uttar Pradesh and
Maharashtra, most companies have already exhausted
their drawing limits. And with a decline in their drawing power
some sugarcane arrears might build up.

The low sugar realisation has been reflecting in the share price of top sugar companies.
Most sugar stocks have fallen sharply from their 52-week high in the month of January.

At the Bombay Stock Exchange, Bajaj Hindusthan has
corrected over 39 per cent to Rs 146.75 from its 52-week
high of Rs 242.90 on January 7. Dhampur Sugar has
corrected over 49 per cent to Rs 79.80 from its 52-week high of Rs 158.60 on January 11.