NEW DELHI: The Centre on Tuesday announced a Rs. 525-crore subsidy on interest rates to cooperative sugar factories that were operational in 2002-03. The package involved rescheduling of term loans and reduction of interest rates on them with a two-year moratorium on return of loans. The Government would pick up the subsidy bill of Rs. 525 crore to provide this ``revitalisation'' package to sugar mills.

In addition, the National Bank for Agriculture and Rural Development will provide liquidity support of Rs. 500 crores to cooperative banks during the two-year moratorium period through borrowings from the market.

Announcing this here on Tuesday, Union Food and Agriculture Minister Sharad Pawar said all ``commercially viable'' cooperative sugar mills that had outstanding term loans on March 31, 2005, and were in a position to repay the loans, would be categorised into two categories. Accordingly, the term loans would be restructured/rescheduled to enable payment within five years for the first (A) category or within 15 years for the second (B) category.

The rate of interest on the restructured loans would be reduced to 10 per cent per annum (from between 11 to 15 per cent) from April 1, irrespective of the original contractual rate.

The Centre would provide interest subvention on the restructured loan estimated at Rs. 525 crores.

Mr. Pawar said 270 cooperative sugar factories would benefit from the package, a majority of which were in Maharashtra. So far government has already conveyed its decision to 47 factories in Category A and 92 in Category B from Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu. Other States that will benefit include Bihar, Gujarat, Punjab, Haryana and Uttar Pradesh.

He said the NABARD would complete the restructuring process by October 1, 2005, a fortnight before the new sugarcane crushing season begins from October 15.

He said NABARD would provide Rs. 500 crores to cooperative banks (who lend to cooperative sugar mills) as they would not be receiving any payment of interest during the moratorium period.

Asked why the package was announced now, at a time when the sugar factories were doing well, he said Finance Minister P. Chidambaram announced the package in his budget speech this year based on the Tuteja Committee report.

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