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Sweet deal for sugar mills, again

Debt-strapped Maharashtra stands guarantee for a new loan of 25 crore to 18 sugar cooperative mills, reports Ketaki Ghoge.

india Updated: Nov 09, 2006 15:42 IST

It is a familiar story. Maharashtra’s staggering debt burden seems to vanish as if by magic — and its coffers begin to overflow — whenever the sugar cooperative sector, run largely by politicians from the ruling Democratic Front (DF) combine, stand to benefit.

The Vilasrao Deshmukh government on Wednesday guaranteed a Rs 25 crore short-term loan for 18 sugar cooperative mills, all controlled by Congress and NCP politicians.

According to figures provided by the Comptroller and Auditor-General (CAG) of India, sugar mills in Maharashtra already owe the government an estimated Rs 172 crore in loan principal and Rs 191 crore in interest. This is apart from the approximately Rs 100-crore given in soft loans every year, and all the other loans that have been written off by the government or lending institutions over the years.

Maharashtra’s total debt burden currently stands at a crushing Rs 1,25,000 crore.

The mills benefiting from the government’s latest round of generosity are controlled by political biggies like Union Minister of State for Rural Development Suryakanta Patil (NCP), former chief minister Shivajirao Patil-Nilangekar (Congress) and former minister Jaydutt Kshirsagar (NCP).

Four of the 18 mills are sick and appear unlikely to be able to repay the loan.

If past experience is any indicator, the government will probably have to repay the entire amount borrowed. In 2003, lending institutions invoked state guarantees for defaulting sugar mills in 16 different cases, and extracted Rs 24 crore from the government, says the CAG report for 2004.

Over the last 5 years, the government has extended guarantees of around Rs 1,500 crore against loans taken by sugar cooperatives. In the same year, co-operation secretary’s office in Mantralaya was attached by debt Recovery Tribunal as a cooperative unit defaulted on payment.

“The state is only the guarantor in this (Wednesday’s) case,” cooperatives secretary JP Dange said.

“The bank will have full rights to coerce money out of the sugar mills if they do not pay the amount within the stipulated time,” Dange added.

Dange said that loans were essential to run these factories at full capacity during the sugarcane-crushing season.

But not everyone agrees. A senior official, who declined to be named, expressed scepticism. “These are political decisions. Given past record, it is not feasible for the government to stand guarantee for these mills.”

Bhogawati Sugar Factory in Solapur, controlled by NCP leader KP Patil, is yet to repay around Rs 9 crore of an earlier loan. But the mill stands to gain again from Wednesday’s decision.

The timing of the loan — just before the municipal council elections — has triggered allegations that the money will be used for campaigning. Vinod Tawde, spokesperson for the BJP, pointed out, “This is to just appease vote banks and keep political workers who run the sugar mills happy.”

Email: ketaki.ghoge@hindustantimes.com