THE rice millers will be provided loans at below market rates to upgrade their factories for producing quality milled rice and cut their losses in the shape of broken rice.

A sum of one billion rupees has been earmarked for them under a scheme initiated by the Sindh Board of Investment in collaboration with the State Bank of Pakistan.

A part of the loan amount will be available to millers possibly in next two weeks or so as almost all nitty-gritty has been worked out. The SBP will provide funds to commercial banks and they would refinance it to millers. The subsidy on loan facility is supported by the Sindh Board of Investment’s Sindh Enterprises Development Fund (SEDF).

President of the Sindh-Balochistan Rice Millers Association Arif Mahesar says the mill losses are heavy with about 12-15 per cent of stocks of broken rice due to obsolete machinery installed as far back as 1960s and 1970s.

Sindh produces around 3.5 million tons of paddy whereas the millers produce around two million tons of refined rice for domestic use as well as for export. Initially, out of 900 rice mills in Sindh, 100 would be offered loans up to 10 million each. A memorandum of understanding is to be signed between the SBP and the SBI authorities to formalise the loaning process through commercial banks.

“The SBI will provide subsidy on loans that would be made available at 6.25 per cent,” said Fayyaz Solangi, SBI’s deputy secretary. The millers have just to pay 2.7 per cent service charges to commercial banks in addition to the principal amount although the normal services charges are somewhere between three to four per cent.

“It’s an incentive for millers to get their mills upgraded with new machineries. The loans will be available to them hopefully in next two weeks. We are initially offering it to 10 mills, and then finance another 90 mills gradually,” explains Fayyaz. He adds that the SBP is finalising some modalities regarding loans. It is likely that the loan is directly paid to vendors who will supply machinery so that the actual purpose of the loan is achieved.

“The SBP will ensure that the loan is genuinely used. Only quality vendors are to be short listed who will be providing the required machinery and other equipment to millers,” Solangi adds.

Mahesar says: “By replacing our machineries we will at least be adding another 200,000 tons of quality rice to our production which will also fetch better export price.

Reports indicate that the government also plans to encourage investment in extraction of oil from paddy bran, one of the main by-products of the rice milling industry. In the first phase, about 10 mills would be set up with the imported technology.

The oil so extracted contains 15-20 per cent of edible oil. Research has been carried out to extract bran oil from indigenous rice bran.

According to Mahesar, paddy in Sindh produces around 10 per cent of rice bran – healthy oil - which millers sell as cheap as Rs-6 per kg for animal feed. “ We have not been able to tap this resource so far whereas India is manufacturing its own machinery to extract bran oil,” he says.