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Tuesday, September 29, 2020

Maharashtra faces new challenge as only 4 of 39 sugar mills fulfill criteria to avail bank guarantees

As Maharashtra is expected to have another bumper cane crop this season, the state government was keen to see the maximum number of mills operational to help farmers sell their cane at the right time.

Written by Parthasarathi Biswas | Pune | July 21, 2020 9:49:25 pm
Successive seasons of bumper crop, followed by the drought of last season, had seen many of the cooperative sugar mills ending the season with weak balance sheets. (Express photo by Gajendra Yadav/Representational)

Ahead of the sugarcane crushing season of 2020-21, the state government has a new challenge on its hands when it comes to extending bank guarantees to financially weak cooperative sugar mills. Officials of the Sugar Commissionerate, after due scrutiny, have found that only four of the 39 mills fulfill all the five criteria set by the state government to be eligible for the guarantees.

Successive seasons of bumper crop, followed by the drought of last season, had seen many of the cooperative sugar mills ending the season with weak balance sheets. The Maharashtra Cooperative Sugar Factories Federation had requested the state government to stand guarantee for 58 mills, which would not have been able to raise fresh finance for the upcoming season due to their weak balance sheet. As Maharashtra is expected to have another bumper cane crop this season, the state government was keen to see the maximum number of mills operational to help farmers sell their cane at the right time.

On March 2, the state government had issued a government resolution (GR), laying down five conditions for mills to be eligible for government guarantees: non-NPA accounts, positive net worth, regular repayment of government dues, a balance sheet in green (ie having reported profit) and government guarantee not being challenged in courts. Mills were asked to submit their financial details for scrutiny. Of the 58 mills, 39 had submitted their proposals, which were scrutinised. The mills collectively require guarantees for loan worth Rs 784 crore.

But, according to officials of the Sugar Commissionerate, only four of the 39 mills fulfilled all the five conditions laid down by the state government, five mills fulfilled four conditions while 13 mills fulfilled three of the five conditions. Rest of the mills fulfilled fewer or none of the conditions.

A senior officer of the state Cooperative department, on condition of anonymity, told The Indian Express that the conditions in the present GR would not allow many of the mills to raise capital needed to start their operations. A sub-committee headed by Deputy Chief Minister Ajit Pawar is expected to take the final decision on the matter. “Either the GR has to be recalled or the sub-committee has to provide guarantees by bringing in exceptions. Either way, the state government has to walk a tightrope in this matter,” said the officer.

Earlier, the Maharashtra State Cooperative Bank was reprimanded for providing loans and guarantees to sugar mills which were nonviable.With only two months left for the crushing season to start, the state government doesn’t have much time to solve this problem.

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