Maharashtra: Hitting Oppn’s sweet spot, BJP to probe sugar sector subsidies

  • Kunal Purohit, Hindustan Times, Mumbai
  • Updated: Sep 05, 2015 17:02 IST

The Bharatiya Janata Party (BJP)-led Maharashtra government may be looking to hit Opposition parties Congress and Nationalist Congress Party (NCP) where it hurts the most.

The government is planning to launch an investigation into subsidies, loans and approvals given to the powerful sugarcane industry in the past 15 years.

The sugar cooperative industry, mostly based in western Maharashtra and parts of the central and northern parts of the state, has been controlled by its founding by leaders, from the Congress and later, the NCP.

First, through cooperative sugar factories and now, through private ones, the leaders have maintained a firm grip over the sugar economy of the state and, as a result, the economy of the western Maharashtra region.

With an eye on breaking the grip of the two parties over the sector and the region, the government wants to ‘expose’ the sort of financial subsidies the sector has received so far.

The government has traditionally offered financial assistance in the form of tax breaks, subsidies and concessions for both sugar cane cultivation and sugar crushing by sugar factories.

For instance, earlier this week, the Centre and state governments gave the sugar industry an export subsidy.

In June, the state decided to pay off interests of loans that sugar mills take to pay farmers’ dues.

“I have told the department to prepare a report on just how much we have spent so far. There has been no compilation of the costs we have incurred on this one sector alone, as against the income it has generated for us,” said Sudhir Mungantiwar, state finance minister.

A source in the department said this was the first step to ‘rein’ in the sector.

“A cursory review revealed to us how these areas, with high sugarcane cultivation, cornered most resources at the cost of other districts. Water consumption, both, by the sugarcane crops as well as factories, was already high. So was the electricity subsidy for these districts,” said a source in the department.

Sanjeev Babar, managing director of the Maharashtra State co-operative sugar factories association, said the industry was ready to face the probe.

“The industry has survived despite difficulties and little government support. In fact, we have managed to give rightful dues to thousands of farmers, which even the government has not been able to do in other crops.”

A bitter fight

The state government has decided to conduct a probe into the money it has spent on the sugar industry, as well as subsidies it has given to facilitate sugarcane cultivation in the state

* What will be probed

- The various tax breaks given to sugar mills, on not just processing of sugarcane, but also the final trade of sugar

- The state will also probe various bailout packages given to sugar mills in the state, from giving farmers their dues to reviving sick mills

* Why the probe

- The government wants to investigate just how much money it has spent, as against profits the industry has passed on to it. But politically, the move has many ramifications

* The ramifications

- Most of these sugar mills are owned and controlled by politicians from the Congress and NCP

- These two parties derive a large part of its clout and money from the sugar economy

- The control over the economy also helps them take control of the resource-rich Western Maharashtra region

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