With strict monitoring of banks and DFIs for recovery of outstanding advances against sugar stocks, the State Bank of Pakistan (SBP) has decided not to grant another extension to the sugar mills for retirement of loans obtained during the sugarcane season 2008-09, sources told Business Recorder on Tuesday.
They said that SBP has instructed banks and DFIs to make proper arrangements for the recovery of outstanding loans against sugar stocks with the aim to ensure on-time release of sugar in the market. Sources said that after getting three months grace period, a lobby of sugar mills is trying for another extension for the retirement of loans and advances obtained against sugar stocks.
However, SBP has decided, in principle, not to grant another extension to the sugar mills for retirement of the over Rs 25 billion advances due to the current sugar crisis in the country and new sugarcane crushing season (starting from November) in which banks would provide new loans and advances.
Following the Economic Co-ordination Committee (ECC) decision, the SBP has already granted three-month extension to the sugar mills for the 100 percent retirement of outstanding loans and advances. Although the central bank had fixed July for the retirement of sugar advances, but on industry's demand and ECC decision it allowed the sugar mills to retire their loans by end of October.
With three-month extension sugar mills have been instructed to phasewise adjust entire loans and advances against pledge of sugar stock (both raw and refined) by 31st October, 2009 as against July 31, 2009. Sugar mills were also allowed to retire their dues in four phases starting with 25 percent till July, 2009, 25 percent by end August, 25 percent by end September and 25 percent by end October, 2009.
The central bank has also started close monitoring of banks and DFIs for recovery of outstanding loans against sugar stock on fortnightly basis with the aim to ensure timely release of sugar stocks in the market.
Sources said that recovery of loans and advances by banks and DFIs is on track and borrowers are adjusting their monthly target of 25 percent loans against the pledge of sugar. Banks and DFIs have provided overall Rs 52 billion financing to sugar mills for sugarcane crushing during the season 2008-09.
Out of total disbursement, banks have recovered 38 percent of their loans and advances extended to Sugar Mills against pledge of sugar stocks (both raw and refined) since June 2009. As on June 30, 2009, the loans and advances against pledge of 1.65 million tons were Rs 40.18 billion which have been reduced to Rs 25 billion against pledge of 1.029 million metric tons sugar on August 15, 2009, sources said.
Hence, just in one and a half month 0.621 million tons of pledged sugar stocks have been released by the banks after the recovery Rs 15 billion. The country's monthly requirement of sugar stood at about 0.3 million metric tons.
It may be pointed out that the sugar stocks pledged with banks have consistently been reducing as these stocks decreased to 1.502 million tons on July 15, 2009, 1.203 million tons on July 31, 2009 and 1.029 million tons on August 15, 2009. The banks' outstanding loans were reduced to Rs 36 billion on July 15, Rs 28.9 billion; July 31 and Rs 25 billion on August 15.
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