The technical committee set up by the Maharashtra government to study the feasibility of advancing bank guarantees to financial weak cooperative sugar mills has decided that only four of the 33 mills should get the guarantee. Senior officials of the committee confirmed that the amount for which the government needs to stand guarantee for these four mills is around Rs 90 crore, as against the Rs 1,030.34 crore demanded by the mills.
At the start of the 2020-21 sugarcane crushing season, Maharashtra is staring at a bumper crop of over 815.50 lakh tonnes (lt) of cane. The bumper crop has raised the issue of whether the cane can be harvested in time. Otherwise, the state government will have to pay compensation to farmers for their non-harvested cane. The sugar industry had pointed out that that this can be avoided if more mills undertake crushing, which would ensure timely harvesting of cane.
However, 58 cooperative sugar mills, which had ample cane availability in their area of operation, had expressed their inability to take season as banks and financial institutions refused to extend working capital to them. Weak balance sheets and negative net worth has been the main reason for the mills failing to raise capital. To resolve this problem, the Maharashtra State Cooperative Sugar Factories Federation had asked for government guarantees for such mills to help them raise working capital.
Earlier in March, the state government had issued a government resolution listing five conditions the mills need to fulfil to qualify for the guarantee. Financial factors like positive net worth and net disposable resource (NDR are assets against which loans can be raised), timely payment of government dues, and non-NPA accounts were some of the conditions listed by the government for mills to be eligible for the guarantee.
Overall, the sugar commissioner’s office received proposals from 33 mills
The technical committee, which met to decide the issue, looked at district-wise cane availability versus crushing capacity to zero in on candidates for guarantees. The mills identified by the committee are located in the districts of Nashik, Satara and Sangli, where the issue of non-harvested cane can arise.
The total guarantee to be extended to these four mills is around Rs 90 crore, which will enable them to raise further capital from banks. The recommendation is expected to be placed before the state cabinet early next week, when a final decision will be taken.
Interestingly, none of the 33 mills fulfilled all the five conditions laid down by the government. The four mills also didn’t fulfil all the conditions, but the standing cane in their area makes it imperative that they start their operations soon .
However, the sugar industry has expressed concern about the logic used by the technical committee while deciding on the issue. “The simple assumption that cane from the opertional area of closed mills will be diverted to other mils is faulty. The transportation cost will be higher. Also overloading of the mill’s established capacity will cause more wear and tear, and lead to overall reduction in their sugar recovery,” pointed out a senior member of the industry.
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