New Delhi, Feb. 12: The government today asked public sector banks to implement a package to provide interest-free loans to sugar mills.

“In the next 10 days, the package will be implemented in all the sugar mills, which come under the scheme,” finance minister P. Chidambaram said.

In December, the Centre had notified the package that would allow sugar mills to get interest-free loans to clear cane price arrears of 2006-07 and 2007-08 sugar seasons. The sugar year covers the period from October to September.

Chidambaram said Punjab National Bank, Indian Bank and Indian Overseas Bank had already implemented the package.

“Punjab National Bank has given me a list of sugar companies where it has implemented the package,” he said. Other banks have been advised to complete the exercise by February 22, he added.

The finance minister also said banks would have to submit the final report to the government on how many sugar mills had been given the credit facility.

The mills will 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 the 2006-07 and 2007-08 sugar seasons.

The government will give a full interest subsidy to all scheduled commercial banks, regional rural banks and co-operative banks for the total duration of the loan.

Infrastructure bonds

Public sector banks have asked for tax exemption on interest earned from investments in infrastructure bonds in sectors such as power and roads.

The demand was raised by the chief executives of public sector banks in their pre-budget meeting with the finance minister.

They also wanted banks to be exempted from fringe benefit tax on their contribution to pension and other funds, besides seeking simplification of rules on tax deduction at source on deposits.

“They have made a number of suggestions — most of these are related to income tax ... There are suggestions which are worthy of consideration ... I told them I will examine these suggestions,” Chidambaram said.