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Relief for cooperative sugar mills as state govt starts process to provide bank guarantee

As many as 58 of the 102 cooperative mills in the state have faced problems in raising capital due to their negative net disposable resource (NDR), ahead of what is expected to be a bumper crop season.

Written by Parthasarathi Biswas | Pune | Published: July 4, 2020 11:20:23 pm
sugar mills, Maharashtra govt, Covid crisis, Pune news, Indian express news Speaking to The Indian Express, Sugar Commissioner Sourabh Rao confirmed that sugar mills have been asked to submit their proposal as well as financial details. (File)

In a step that will bring significant relief to ailing cooperative sugar mills in Maharashtra, the state government has asked them for a proposal to consider their pleas to grant government guarantee, so that they are able to raise capital for the upcoming season. As many as 58 of the 102 cooperative mills in the state have faced problems in raising capital due to their negative net disposable resource (NDR), ahead of what is expected to be a bumper crop season.

In banking terminology, NDR refers to available resources like land, which can be pledged with banks to raise finances. Over the last few years, drought and plummeting sugar sales had taken a toll on the financial health of sugar mills, which are now not in a position to raise new capital from the banks. The Maharashtra State Cooperative Sugar Factories Federation has repeatedly asked the state government to stand guarantee for such mills so that they are able to raise fresh finance from banks.

The ongoing Covid-19 crisis has worsened the problem, as mills failed to sell their sugar stock .

On March 2, the state government had issued a government resolution, which listed terms and conditions for mills to avail of short-duration and mid-duration government guarantees to help them raise capital.

Speaking to The Indian Express, Sugar Commissioner Sourabh Rao confirmed that sugar mills have been asked to submit their proposal as well as financial details. “Details like their net worth, net losses, available disposable resources etc will have to be submitted,” he said. A technical committee chaired by the sugar commissioner will scrutinise the proposals and forward them to the concerned officials. A cabinet sub-committee, headed by Deputy Chief Minister and Finance Minister Ajit Pawar, will look into the proposals and then take a call on granting bank guarantees.

Cooperative sugar mills mostly deal with the Maharashtra State Cooperative Bank and various district central cooperative banks. They had complained of not being able to avail the interest moratorium granted by the central government as the cooperative banks had failed to pass it on to them. These mills had asked for a lenient view on NDR problem, which they had also taken up with NABARD.

Rao said till Friday, eight mills had submitted their proposal. “The technical committee is scheduled to meet early next week and scrutinise the proposals, following which they will be sent to the cabinet sub-committee,” he said.

It is expected that the cabinet sub-committee will meet at the earliest to take a call about the bank guarantees.

The state government has become increasingly wary of issuing bank guarantees to sugar mills after the Supreme Court compelled it to pay over Rs 2,000 crore to MSC Bank in way of bank guarantees it had given for 34 sugar mills, which went defunct.

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