MSCB refuses to lend sugar factories; 6 proposals on hold

Maharashtra State Cooperative Bank (MSCB) has refused to provide further funding to financially distressed sugar factories, including those controlled by Nationalist Congress Party and Congress leaders. The bank cited financial constraints and non-compliance with required documents as reasons for its decision. This move has put six more pending proposals on hold.

Maharashtra State Cooperative Bank (MSCB) has expressed its inability to fund financially distressed sugar factories anymore, days after it extended ₹632 crore in loans to five factories controlled by Nationalist Congress Party (NCP) and Congress leaders.

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The state cabinet in September cleared a proposal standing bank guarantee for the margin money loans to be given to 12 sugar factories from MSCB. Soon thereafter, proposals of the five factories were approved by the sugar commissionerate and the finance department last month gave its nod for giving guarantee for ₹632-crore loans. An order was issued two weeks ago, and half of the loan amount had already been dispersed by the bank.

However, MSCB has now written to the government saying it can no longer entertain any such proposal, citing financial constraints.

“We have some internal problems for which we have put the proposal of the loan funding on hold. We have proceeded with the process of disbursing loans to the five factories that have complied with our conditions,” Dilip Dighe, managing director of MSCB, said.

An official from the cooperation department said the bank’s decision is based on the fact that many sugar factories have not been adhering to the conditions by submitting the required documents.

“Moreover, they have been putting pressure on the bank for the disbursal of loans at the earliest. The bank, which had a bad experience of unrecovered loans given to the sugar factories more than a decade ago, has decided to tread cautiously and withheld its proposal of funding these factories,” the official, who did not wish to be named, said.

MSCB’s decision has put six more pending proposals on hold, officials said.

Confirming that they have received the bank’s letter, Rajesh Kumar, additional chief secretary, cooperation department, said they are planning a meeting with bank officials to understand their situation.

“There are a few more proposals from the sugar factories. We will have the option of obtaining loans from the National Cooperative Development Corporation, but their interest rate is 9.45% against MSCB’s 8%. Secondly, the MSCB loan is convenient as the responsibility of the repayment lies with the factories, unlike in the case of NCDC where it is paid directly by the state government,” Kumar said.

The five factories that were granted loans are Sahakar Shiromani Vasantrao Kale factory ( ₹146 crore) under the control of Kalyan Kale of NCP, Chhatrapati sugar factory ( ₹128 crore) under Datta Bharne of NCP, Jay Bhavani sugar factory ( ₹150 crore) under Amarsinh Pandit of NCP, Bhaurao Chavan sugar factory ( ₹147.79 crore) under the control of Congress leader and former chief minister Ashok Chavan, and Sant Kurmadas sugar factory ( ₹59.49 crore) under Dhanajirao Sathe of Congress. The sixth proposal of Ghodganga sugar factory, which is controlled by NCP MLA Ashok Pawar, was rejected owing to non-compliance with the conditions.