The Union food ministry has decided to provide subsidized loans to sugarcane farmers on which the farmers have to pay an interest of just 4% instead of 7%. The Centre has taken the initiative to facilitate sugarcane farmers so that they can purchase quality seeds, fertilizers and pesticides. 

The food ministry will provide the loans from its Sugar Development Fund. These subsidized loans are expected to be advantageous for sugarcane framers, especially in Maharashtra and Uttar Pradesh. Moreover, it will encourage sugarcane farmers to plant more in the coming years. 

The country’s sugar production is 160 lakh tonnes as compared to domestic consumption of 230 lakh tonnes, which cause government to import large amounts sugar in both raw and white forms. The production in coming year has been estimated to 130-160 lakh tonnes, and it will adversely affect the market as retail prices will be pushed beyond Rs 30 per kg. 

The soft loan is expected to also increase productivity per acre.

The Department of Food and Public Distribution has stated that the loans would be given to the applicant sugar factories at an interest rate of 4% pa and they have to distribute it to the cane growers in their area till March 31, 2010 at same interest rate of 4%. The mills would get their loans by December 31, 2009. The sugar factories have to repay the loans back to the government along with the interest within four years. 

The Sugarcane production fell 22% during the last year to 271 million tonnes due to which sugar prices keep on increasing. Currently, most companies are selling sugar at a price of Rs 3,000 a quintal.