New Delhi, Sept. 13: A little over a month before the Bihar elections, Union agriculture minister Sharad Pawar has announced a Rs 1,025-crore package for sugar mills in the country.

“The central government will provide an interest subsidy of Rs 525 crore to bring down the interest rates on the loans of sick and viable sugar mills,” he said today.

The apex agricultural co-operative bank, Nabard, will provide liquidity support of Rs 500 crore for restructuring the sugar mills, he added.

The sop assumes significance as Pawar’s support base in Maharashtra is concentrated in the sugar belt. More crucial, it has come in the run-up to the four-phase Bihar elections starting October 18.

The Election Commission today issued a notice to Pawar, saying his “promises to the electorate of Bihar? amounted to violation of the model code of conduct”. At a meeting in Muzaffarpur, he had also promised to start sugar mills in the state.

Of the package announced today, the subsidy of Rs 525 crore will be used to slash the interest on term loan rates for sugar mills from the current rate of 14-15 per cent to 10 per cent. The rate of interest on the restructured loans will be reduced to 10 per cent per annum with effect from April 1, 2005, irrespective of the original contractual rate.

Pawar said all cooperative sugar mills in the country which have term loans outstanding as on March 31, 2005, are commercially viable and have adequate operational surplus to repay the loans will be categorised in two groups.

Under both categories, a moratorium of two years for payment of interest and principal amount will be provided.

While the period of repayment of term loan in the first category would be five years, those in the second category would be 15 years.