Agriculture Industry

Centre to restructure Sugar Development Fund loans 171 mills owe ₹3,053 crore to financial institutions as of October 31

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05 January 2022, New Delhi: The Centre has released a flexible loan restructuring plan for debt-ridden sugar mills to clear their outstanding amount from the Sugar Development Fund (SDF). The plan offers 24 months of moratorium which the government hopes will help it to collect a sizeable portion of the dues. As many as 171 sugar mills owed ₹3,052.78 crore to financial institutions as of October 31.

The balance loan amount including principal and interest will be divided into equal monthly instalments for five years after moratorium period, according to the guidelines released by the Food Ministry. While penal interest will be waived off, mills will have to clear principal and interest, the guidelines said. IFCI will be the nodal agency for private mills while the National Cooperative Development Corporation (NCDC) is designated for scrutiny of the applications of cooperative mills. 

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A committee under a joint secretary of Food Ministry will select the beneficiaries of the scheme.“This is a new offer only for the ailing mills to clear both principal and interest. Hope they will take the opportunity and clear their outstanding,” said a Food Ministry official. All of these 171 mills, who have defaulted the SDF loans, need not necessarily lack the capacity to pay, said an industry source. Due to several reasons they do not clear their loans, the official added.


According to the restructuring formula, sugar factory incurring “cash losses continuously for last three financial years or if the factory’s net worth is negative” is eligible to apply for loan restructuring. The eligibility condition also says the factories which have not closed down or not stopped crushing cane for more than two sugar seasons can apply for the restructuring.

Also those factories which had availed the restructuring of loan facility in the past three years are not eligible to apply this time.

Out of ₹3,052.78 crore default of SDF loans, ₹1,627.79 crore was taken by mills for modernisation, ₹1,039.99 crore for co-generation unit, ₹260.69 for setting up ethanol plants and ₹1,24.31 crore for cane development, the official said. Not a single company in Uttar Pradesh has defaulted the SDF loan disbursed to set up ethanol plants.

Also, the total defaulted amount includes ₹1,249.72 crore as principal and ₹1,060.57 crore as interest while remaining ₹742.48 as penalty. 

‘Positive development’

“It is a positive development and means a lot for those mills that are not doing well for various reasons and are unable to repay the bank loans and along with the SDF loans,” said Abinash Verma, Director General, Indian Sugar Mills Association (ISMA), the apex trade body.

For long time, the industry has been petitioning the Government seeking restructuring of the SDF loans and waiver or reduction of interest for mills that have not been doing well for various reasons, Verma said.

The interest charges for SDF loans are very nominal and are lower by 2 per cent points compared to the bank rates.

With inputs from BL Bengaluru Bureau

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