Sugar subsidy of Rs 420 cr to be borne by banks

New Delhi, July 15: Pursuant to the Government's decision to create a buffer stock of 20 lakh tonnes of sugar from May 1, 2007, Government will release subsidy of Rs 378 crore out of Sugar Development Fund and the banks will have to sanction additional credit limits amounting to Rs 420 crore.

The Rs 420 crore for the release of margin consequent upon creation of the buffer stock from the existing stocks of sugar will be sanctioned by commercial banks, said RBI in a notification.

The entire amount of Rs 798 crore will be used exclusively by the sugar mills for payment of cane price to farmers.

The amount released as a result of providing 100 per cent drawings against buffer stocks- the amount in lieu of the margin money should be credited to a special account. It would be necessary for the banks to ensure that the amount available in this account is utilised for making cane payments, RBI added.

UNI