Last updated: December 17th, 2019 5:03 PM

Sugar Development Fund

The Sugar Development Fund (SDF) was established in the year 1982 to provide monetary support to the sugar industry. Set up under the Sugar Development Fund Act, the SDF allows sugar mills to obtain loans at nominal rates of interest. IFCI, a public NBFC is a nodal agency for the disbursement of SDF loans to private or public sector factories. For the cooperative sector, loans are routed through the National Cooperative Development Corporation (NCDC).

Objective of SDF

The objective of the fund is to offer financial assistance to tackle problems like

• Low yield
• Outdated machinery
• Low consumption
• Short crushing season of sugarcane crop
• Cyclical nature of the sugar sector

Loan Schemes Available in SDF

Factories may avail Sugar Development Fund loans for five purposes,

1. Modernisation and rehabilitation of the factory
2. Cane development in an area near factory: Extended for setting up any of the following facilities:
   • Heat treatment plant
   • Seed nursery
   • Drip irrigation system
3. Bagasse-based cogeneration power projects undertaken by a factory
4. Production of molasses-based ethanol or anhydrous alcohol

Conversion of an ethanol production plant as Zero Liquid Discharge (ZLD) plant

General Process to Avail Loan from SDF

The Sugar Development Fund Rules of 1983 have laid down procedures for the application, processing and grant of loans under the fund. Step 1 – Application submission: Factories make the applications to the standing committee of relevant government officers formed under the SDF act. Applications for all categories of SDF loans are available online at the website https://dfpd.gov.in/download-forms.htm Step 2 – Application registration: All applications will be registered date-wise in the respective SDF divisions. Due priority is given for factories from cooperative or private sectors. Step 3 – Consideration of sub-committee: The standing committee has the discretion to appoint sub-committees to improve efficiency. The applications will first be considered by relevant sub-committee. Factory representatives may be invited to answer queries or make presentations. Step 4 – Consideration of standing committee: The standing committee will scrutinise the recommendations of the sub-committee regarding Sugar Development Fund loan Step 5 – Government approval: Sanctioned loans receive administrative approval for release of funds. The approval usually includes a list of stipulated conditions to be met by the factory. Step 6 – Loan disbursement: Based on the type of loan, funds may be released in one or more instalments after a request is received by the nodal agency (NCDC or IFCI) from the factory. Step 7 – Monitoring: The nodal agencies will continue to monitor the utilisation of loans after disbursement.

Specific Conditions and Eligibility Criteria

Common conditions for all categories of SDF loans are as follows,

• No outstanding loans for the purpose applied for
• No default on any other Levy Sugar Price Equalisation Fund (LSPEF) or Sugar Development Fund loan
  • Security may be presented as either
  • A bank guarantee from a scheduled bank
  • Mortgage on movable/immovable properties of the sugar mill

SDF loans are extended at an annual interest of 2% below bank rate (as per RBI) There are some specific conditions for each category of loan as well.

Modernisation and rehabilitation loan:

• Factory involved in cane crushing process for at least three years
• Approval from a scheduled bank or a financial institution for monetary assistance
• Not applicable for refinancing, cost overrun, purchase of second-hand machinery or Project started prior to the date of application

Cane development:

• Applications to be submitted to the relevant state government authority. After due consideration, the application shall be sent to the standing committee of the SDF.
• 10% contribution from the sugar mill as margin money for the project
• Loan disbursal only through respective state governments
• A tripartite agreement between the sugar factory, central and state governments

Bagasse-based cogeneration power project:

• 2500 TCD installed capacity
• Applicant must visualise marketable surplus generation of power
• Approval from a scheduled bank or a financial institution for monetary assistance
• Greenfield projects are also eligible for the generation of exportable surplus power
• Not applicable for refinancing, cost overrun, purchase of second-hand machinery or Project started prior to the date of application
• Ethanol or anhydrous alcohol production:
• Not applicable for refinancing, cost overrun, purchase of second-hand machinery or Project started prior to the date of application

Approval from a scheduled bank or a financial institution for monetary assistance

Documents Required

At the time of application, Sugar Development Fund rules stipulate the attachment of necessary documents for each category. For all categories except cane development loan, applicants must submit

• Filled application form and respective annexure
• Detailed project report
• Technical feasibility report
• A financial appraisal report from a scheduled bank or financial institution
• English version of sanction letter from a scheduled bank or financial institution
• Acknowledgement from the relevant authority for the application of the following:
  • No Objection Certificate(NOC) from respective Pollution Control Board(PCB)
  • Environmental Impact Assessment Clearance

For cane development loan, applicants must submit

• Filled in Application Form-III
• Relevant project document
• Recommendation from the respective state government
• Letter issued by state government forwarding relevant documents of the project

The application form is provided below:

Quantum of Assistance and Pattern of Repayment

Sugar Development Fund loan type	Assistance available	Disbursement pattern	Repayment pattern
Modernisation and rehabilitation	Promoter’s contribution: Minimum 10% of the project cost SDF loan: Max.40% of the eligible project cost A loan from bank/FI: Remaining cost of the project	Either lumpsum or two equal instalments	Repayable in a maximum period of 5 years after 5 years from the date of disbursement
Cane development	SDF loan: Max.90% of total project cost (total project cost capped at Rs.6 crores) Sugar factory contribution: At least 10% of the project cost	Two annual instalments	Repayment within 7 years after disbursal, including 3 year moratorium
Bagasse cogeneration project	Promoter’s contribution: Minimum 10% of the project cost SDF loan: Max.40% of the eligible cost for Brownfield project; Max.20% of the eligible cost for a Greenfield project A loan from bank/FI: Remaining cost of the project	Either lumpsum or two equal instalments	Repayable in a maximum period of 5 years after 3 years from the date of disbursement
Ethanol or anhydrous alcohol production	Promoter’s contribution: Minimum 10% of the project cost SDF loan: Max.40% of the eligible cost for Brownfield project; Max.20% of the eligible cost for a Greenfield project A loan from bank/FI: Remaining cost of the project	Either lumpsum or two equal instalments	Repayable in a maximum period of 4 years after 1 year from date of disbursement
Conversion to ZLD plant	Promoter’s contribution: Minimum 10% of the project cost SDF loan: Max.40% of the eligible project cost A loan from bank/FI: Remaining cost of the project	Either lumpsum or two equal instalments	Repayable in a maximum period of 4 years after 1 year from date of disbursement

  The application form for Modernisation and rehabilitation loan is provided below: The application form for Ethanol or anhydrous alcohol production is provided below: