Good News For Sugar Co-operatives: Amit Shah To Direct Banks To Adopt Flexible Lending Policy For New Ethanol Projects

The National Federation of Co-operative Sugar Factories (NFCSF) has stated that Union Co-operative Minister Amit Shah has promised to direct banks to carry out a rather flexible lending policy for sugar mills for setting up new ethanol plants.

This official release from the NFCSF followed the meeting that took place between Shah and a consortium of sugar mills headed by NCP supremo Sharad Pawar on Tuesday.

Apparently, the senior union cabinet minister has indicated to the federation that the ministry will issue orders regarding a flexible policy for funding ethanol projects before 15^th August itself.

The NFCSF recommended Shah to set up an independent ethanol manufacturing unit within the premises of the existing co-operative sugar mills.

“The requirement of Tripartite Agreement (TPA) between ethanol suppliers, OMCs and banks has not been a success for cooperative sugar distilleries due to their unhealthy balance sheets,” the letter read, as reported by Economic Times.

The federation believes that banks will be comfortable to get into TPAs with the independent ethanol units on the basis of their projected future revenue and also committed supply of ethanol to oil marketing companies (OMCs) extracting regular payments.

"The requirement of Tripartite Agreement (TPA) between ethanol suppliers, OMCs and banks has not been a success for cooperative sugar distilleries due to their unhealthy balance sheets. As a result, only 88 out of 422 proposals have been funded by banks, in which the share of the co-operatives is negligible. To overcome this major roadblock, we suggest establishing an independent Ethanol Manufacturing Unit within the premises of the present co-operative sugar mill. Banks will have a comfort level to enter into TPA with these independent business units based on their future estimated revenue on supplying committed ethanol to OMCs who can release payments in ESCROW accounts from where banks can collect their loan amount," said NFCSF letter written to Amit Shah, the first co-operation minister of the country.

Furthermore, the delegation of co-operative sugar mills also demanded an increase in the minimum selling prices (MSPs) of sugar, which they claim hasn’t climbed up in the previous two-and-a-half years.