Cotton mills have failed to pay back as much as Rs1,700 crore to the government for years, according to the latest figures collated by the textile department. This has prompted the government to tweak its cooperative funding scheme. The old scheme was launched in the early 1990s to promote investment in the textile industry.
In a recent meeting, the textiles department took review of the outstanding share capital to 130 cotton mills across the state in the past 25 years. The department came across some startling figures as the government could recover only Rs73.61 crore, of the Rs1,748 crore that had been released towards the share capital over the last two decades. Most of the mills are under leaders from political parties.
Though 130 societies sought the funding as share capital to set up the mills, 29 of them have gone into liquidation, while three have been shut down. Twenty four of them are still under construction, while only 34 of them are running.
Given the state’s poor finances and ballooning debt, the government has now decided to review its norms for the recovery of the dues.
“We are now thinking to appoint Class-1 government officers in the board of directors, besides getting the provision of attaching the property of the other directors on board, if the mill goes into liquidation. Instead of extending funding to too many mills, our endevour would be to complete the funding to the existing entities so that their liabilities are fixed. It is fact that when private cotton mills are running in profit, the cooperative mills find it difficult to go operational due to the lack of professionalism,” Subhash Deshmukh, textiles and cooperation minister told HT.
The state government extends a share capital of 45% to cotton mills set up on a cooperative basis by the board of directors in general categories. With the 50% loan from the open market, the mills are expected to bear the cost of 5%. For cooperative mills run by the Scheduled Castes members, the social justice department shares another 50% as share capital, in addition to the 45% by the textiles department.
According to the officials from the department, the government has failed to recover the dues due to the political patronage the mills enjoy. “The mills are expected to start paying back as soon as production starts. To avoid the repayment, some mills do not draw the last installment of the govermnent share. Some of the them have recruited excessive manpower, while in few cases the management has paid an exorbitant price to make the business unfeasible,” the officer said .