In largesse to around 40 sugar co-operatives, the state government extended a guarantee for loans worth Rs635 crore, without the approval of the finance department.
This could become a liability for the taxpayer, because many of the co-operative mills run by politicians are not doing well.
The state’s finance department, in a statement tabled before the legislature, said from 2010 to 2011, the government had stood in as a guarantor for loans worth Rs895 crore. The statement had to be tabled because the government enacted a law, which forces it to present the status of guarantees given through the year before the legislature.
The loans were provided through the agriculture department and the co-operation department. The protocol in such cases is that a parent department, which requires loans, has to forward a proposal to the finance department.
The guarantee is given after the finance department gives approval and issues a decision to this effect. But, in the case of loans worth Rs635 crore proposed through the co-operation department, there was no formal approval taken from the finance department and hence no final decision was taken.
The statement says, “Administrative approval was taken by the cabinet sub-committee in this regard. However, no final proposal went from co-operation to the finance department for final approval.”
The finance department approval is mandatory as a check to ensure that guarantee is not given to a potentially bad loan. However, in this case, a large chunk of these loans were taken through the Maharashtra State Co-operative Bank, currently in the red.
“This is a huge financial irregularity and a bad precedent. I have sought an explanation because these decisions can compromise and further jeopardise the state’s financial health,” said Bharatiya Janata Party legislator Devendra Phadnavis.
“I will have to check on this. I agree finance department approval is mandatory for all government guarantees,” said minister of state for finance Rajendra Mulak.