Bank loans

Maharashtra Cooperative Fraud: State Won’t Guarantee Bank Loans to Sugar Mills

The Maharashtra State Assembly on Monday discussed the sugar mill auction scam where sugar mills auctioned at a lower price were bought by politicians.

Deputy Chief Minister Ajit Pawar, who himself is facing allegations of buying a sick sugar factory in Satara at a lower price, responded to questions raised by opposition leader Devendra Fadnavis.

Pawar said that starting from First Chief Minister Yashwantrao Chavan to Devendra Fadnavis (who served as CM for five years (2014-2019), the state government has offered guarantees for sugar mill loans without any hesitation.

“After Uddhav Thackeray became chief minister, about five factories received guarantees, then the chief minister clearly stated that the state government would not guarantee cooperative sugar factories (to raise loans from banks) . In the past 2.5 years, no factory has received collateral on their loan,” Pawar said. He added that sugar mill managers will now have to run the show on their own and take out loans from banks. Pawar admitted that many banks were facing a financial crisis because of loans to sugar mills.

Ready before sugar season

Cooperative sugar mills opt for bank loans before the start of the sugar season to pay harvesting contractors, to overhaul machinery and for other work. Mills asks the State to stand surety for the bank loans. Many factories face problems in obtaining bank loans as they are not eligible for loans as they do not meet National Bank for Agriculture and Rural Development (NABARD) standards. Factories face difficulties in obtaining loans due to their negative Net Available Resources (NDR). In these circumstances, the state government steps in to provide a guarantee.

Interestingly, when Uddhav Thackeray took office as Chief Minister in November 2019, the government canceled the guarantee on loans of over Rs 300 crore taken by seven sugar mills owned by BJP leaders.

Published on

March 14, 2022