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The government has directed public sector banks to implement a sugar package that involves provision of interest free loans to sugar mills, and submit a report in the next 10 days. "In the next 10 days the package will be implemented for all sugar mills, which apply under the scheme," Finance Minister P Chidambaram told reporters in New Delhi on Tuesday after meeting the heads of public sector banks. The Centre had, in December, notified the package that would allow sugar mills to avail of interest free loans for clearing cane price arrears of 2006-07 and 2007-08 sugar seasons. Sugar year runs from October to September. Chidambaram, said Punjab National Bank, Indian Bank and Indian Overseas Bank have already implemented the package. "PNB has given me a list of sugar companies for which it has implemented the package," he said, adding that other banks have been advised to complete the exercise by 22nd February. The minister also said the banks will have to submit the final report to the government by that date about how many sugar mills have been given the credit facility. Government has said that mills would have to repay the loan in four years, including a moratorium of two years. Banks are expected to provide loans equivalent to the notional central excise duty payable by sugar mills on total output of sugar during 2006-07 and 2007-08 sugar seasons. The government would give full interest subvention to all scheduled commercial banks, regional rural banks and co-operative banks for the total duration of the loan. Chidambaram said the government has told the banks that they must implement the package in letter and spirit. As per the notification, the interest subvention will be limited to 12 percent per annum, of which 5 percent will be met out of general budget provisions of the central government and the remaining 7 percent from the Sugar Development Fund. The loans will be sanctioned for clearance of arrears or cane price to be calculated on the basis of statutory minimum price (SMP) fixed by the Centre. The cane arrears for 2006-07 season was estimated at about Rs 2,000 crore. The government has appointed five public sector banks, including State Bank of India, Punjab National Bank and Bank of Baroda, as nodal agencies for the purpose of payment of interest to commercial banks. NABARD will oversee the activities for cooperative banks and RRBs, the notification said.
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