Government Issues Guidelines to Restructure Sugar Loans

Sugar Loans

Indian Market
by 5paisa Research Team Last Updated: 2022-08-08T18:58:52+05:30

The government has issued detailed guidelines to help the sugar mills by restructuring the loans taken from the Sugar Development Fund (SDF). In case of defaulting sugar factories, that fulfil certain basic criteria, the borrowers will get a moratorium of 2 years and then a repayment period of 5 years to fully pay down such loans taken from SDF.

According to the government, the total loans from the Sugar Development Fund (SDF) that are currently under default add up to Rs.3,068 crore. This is inclusive of the principal amount and the accumulated interest on these loans.

The SDF was first launched in the year 1983 to provide easy credit to sugar mills to help them tide over the sectoral crisis. The detailed note for restructuring of such loans was issued by the Department of Food and Public Distribution.

This restructuring will be made available to weak but economically viable sugar units, that meet basic criteria. The Sugar Development Fund Act was passed in the year 1982 and the loans were disbursed since the year 1983.

Out of the total amount of Rs.3,068 crore that is overdue, Rs.1,249 crore is towards the principal amount, Rs.1,071 crore is towards the interest amount and Rs.748 crore is towards the additional interest applicable due to default.

The restructuring will be applicable uniformly irrespective of the nature of the borrowing organization be it a public limited company, private limited company or a cooperative society. For eligible sugar factories, the additional interest amount will be waived in full.

For the period of the moratorium and the full period of repayment, the interest will be charged on the outstanding amount based on the bank rate prevailing on the date of the approval of the restructuring of the loan.

There will be 3 categories of borrowers that will be eligible for this restructuring package.

•    A sugar factory that is continuously incurring cash losses for the last 3 years in succession

•    Where the net worth of the business is negative but the factor is not yet closed as of today

•    Where the factory has not ceased crushing cane for more than 2 sugar seasons (October to September) excluding the current season.

The factory will be eligible for this restructuring if it satisfies any of these conditions.

The idea of this restructuring package is to ensure that factories that have been  under financial strain are able to come out and take advantage of the current economic scenario where sugar prices are expected to be extremely buoyant.

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