Union Cooperation Minister Amit Shah has promised to direct banks to adopt a flexible lending policy when financing sugar mills to set up new ethanol plants by August 15, according to a release from the National Federation of Co-operative Sugar Factories (NFCSF).
A delegation of co-operative sugar mills led by Sharad Pawar, the leader of the Nationalist Congress Party, met with Union Cooperation Minister Amit Shah today in Parliament.
As per the Federation’s press release, Amit Shah pledged to issue the orders before August 15th requiring banks to adopt a flexible policy regarding the funding of the ambitious ethanol projects.
‘Due to their weak balance sheets, cooperative sugar distilleries have struggled to meet the requirement of a Tripartite Agreement (TPA) between ethanol suppliers, oil marketing companies(OMCs), and banks.’
As a result, only 88 of 422 proposals were financed by banks, with co-operatives having a negligible share. To overcome this major obstacle, we propose setting up an independent Ethanol Manufacturing Unit within the present co-operative sugar mill’s premises.
According to the NFCSF letter to Amit Shah, the country’s first cooperation minister. ‘Banks will be more happy entering into Tripartite Agreement with these independent business units based on their future estimated revenue from supplying committed ethanol to OMCs, who can release payments in ESCROW accounts from which banks can collect their loan amount.’
‘To reduce swelling sugar inventories, ventures producing ethanol directly from unsold sugar and projects mixing 15-20% sugar in molasses to produce ethanol should be incentivized and given higher selling prices of such ethanol to empower these projects to be economically viable,’ it added.
The diplomats of Maharashtra’s co-operative sugar mills, led by Pawar, also informed Shah of the need to raise sugar’s minimum selling prices (MSP) ‘For the past 2.5 years, the MSP, which is presently fixed at ₹ 31/kg, has not been increased. The increase in MSP imposes no financial burden on the government. The delegation also demanded differential pricing based on sugar grade’ said the letter from the NFCSF to Shah.
According to the press release ‘The Union Cooperation Minister agreed to raise the MSP in response to our request. After discussing the matter with the Prime Minister, he promised to take action as soon as possible.’