Relief for sugar sector: One Time Settlement Scheme for SDF loans launched

In a relief for sugar sector, the government has launched One Time Settlement (OTS) Scheme for SDF loans.

Under Sugar Development Fund Act, 1982 and Sugar Development Fund Rules, 1983, loans are given to sugar factories, inter-alia, for five scheme viz. (i) Modernization Cum Expansion of sugar factory, (ii) Cane Development, (iii) Bagasse-Based Cogeneration power projects, (iv) Production of Anhydrous Alcohol or Ethanol from alcohol or molasses and (v) conversion of existing plant to Zero Liquid Discharge plant. The loans carry a concessional rate of simple interest of 2% below the Bank Rate.

A one time settlement policy will help millers to exit from the defaulters list.

As per the guidelines for restructuring of loans under rule 26 of SDF, applications for restructuring of Sugar Development Fund (SDF) loans under rule 26 of the SDF Rules, 1983 (as amended) will be considered and evaluated on the basis of the guidelines mentioned in the document. These guidelines are subject to amendment by the Standing Committee set up under the SDF Act, 1982 (as amended). These guidelines are applicable for SDF loans availed by all types of concerns including Co-operative Societies, Private Limited Companies and Public Limited Companies.

Eligibility Criteria:
Sugar Factory/undertaking applying under rule 26 need to meet the following eligibility criteria:
a. The sugar factory has been incurring cash losses continuously for the last 3 financial years or Sugar Factory’s net worth is negative.
b. The sugar factory is not closed/has not ceased to crush cane for more than 2 sugar seasons excluding current sugar season.
c. An undertaking from the applicant sugar factory certifying that the area of operation of the mills has potential for development of cane.
d. The sugar factory has conducted latest audit and has convened AGM timely.
e. The Sugar Factory/undertaking has not availed the restructuring of loan facility under Rule 26 earlier.
f. Sugar factories which have availed restructuring of loan under Rule 26 A in last three financial years excluding current financial year of application shall not be eligible for
restructuring under this rule.
g. The proposal of the Sugar Factory/undertaking is recommended by the Committee for Rehabilitation.
h. In case of any adverse/legal action by any lender the restructuring proposal shall not be considered. However, Restructuring may be considered even after the borrower / sugar mill is referred for litigation by the SDF nodal agencies, on behalf of SDF, at Debt Recovery Tribunal (DRT) for recovery of dues.

Scope of Restructuring of Loan under Rule 26:

a. Restructuring of the SDF loans would be in the form of capitalization of balance interest along with principle and re-schedulement.
b. Schedule for payment of balance of Principal amount and Interest amount will be
modified with moratorium period of 24 months or the duration applied for by the
sugar factory whichever is less. No repayment (of Principal or Interest) shall be made
during the moratorium period. However, normal interest shall continue to accure
during the moratorium period.
c. Balance loan amount including Principal and Interest will be divided into equal
monthly installments for five years after moratorium period.
d. Period of moratorium under restructuring of loan will start from the date of issue of
the letter informing approval by the competent authority.

One Time Settlement (OTS) Scheme
Notwithstanding Clause 3,4, 5(a)(iv), 5(a)(vi), 5(a)(vii), 5(a)(viii), 5(a)(xii), 5(g)
and 5(h) of the guidelines, the proposals of the sugar factories/undertakings for
complete payment of Principal and Interest (with waiver of additional interest) may
be considered provided:
i. Normal Interest shall accrue and be charged till the date of such complete
payment of said Principal and Interest.
ii. The complete payment shall be made by the sugar factory/undertaking
within six months of issue of Administrative Approval issued pursuant to the
application under this clause.
iii. The proposal of the sugar factory/undertaking is recommended by the Committee for Rehabilitation.

Provided further that, if any of the above conditions are not fulfilled such application under this sub-clause shall be closed forthwith with a result of restoration of the original liability of SDF over dues including Principal, Interest and Additional Interest. However any payment made by the sugar factory/undertaking during this process will be adjusted first towards payment of additional interest, then to Interest and thereafter for payment of Principal.

f. Waiver of additional interest in full will be given to the eligible sugar factories.
However, no amount of Principal and interest will be waived off.

g. Rate of interest will be changed to the interest rate as per prevailing bank rate on the
date of approval of rehabilitation package as per SDF Rule 26 (9) (a).

P.G. Medhe, sugar industry expert and Ex MD, Rajaram Co-Op.Sugar Factory, Kolhapur said, “Deep gratitude to the Union Government for the invaluable support extended to the sugar industry through the announcement of one-time settlement of defaulted SDF loans and interest. This remarkable decision, waiving additional interest charges and restructuring the due principal amount and interest for 7 years with a 2-year moratorium period, is a beacon of hope for our industry facing financial challenges. Governments timely intervention is truly appreciated, and we wholeheartedly welcome this proactive step towards revitalizing the sugar sector. Thanks the Union Govt for their unwavering support.”

Dilip Patil, Managing Director of Samarth SSK Ltd said, “The restructuring of loans from the Sugar Development Fund (SDF) by the Department of Food and Public Distribution, Government of India, is praiseworthy. The revised operational guidelines have introduced a One Time Settlement (OTS) scheme, which offers a practical solution to the financial challenges faced by sugar mills. This addresses the persistent issue of debt accumulation in the industry. The OTS scheme is designed to offer much-needed financial relief to sugar millers, which will help them resolve their debts more easily. This initiative not only helps with fund recovery, but it also enables mills to concentrate on modernizing and expanding their operations without the burden of overdue loans. OTS scheme is a positive step towards building a stronger and financially stable sugar industry in India.”

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