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Govt overturns its own decision, stands guarantee for sugar factory loans again
The Shinde government in Mumbai has reversed its decision and will now provide a bank guarantee for loans taken by sick sugar factories controlled by political leaders. The loans amount to about ₹1,100 crore and will be given to 13 sugar factories under politicians from ruling and opposition parties. If the factories fail to repay the loans, the state government will be responsible for repayment. The government has already paid ₹1,220 crore in the last five years towards bank guarantees for defaulter factories.
Mumbai: The Shinde government has changed its own decision of not giving a bank guarantee for loans taken by sick sugar factories controlled by political leaders. The state cabinet on Wednesday took a decision to enable loans to the tune of about ₹1,100 crore to 13 sugar factories under politicians from ruling and even opposition parties.
The government has already paid ₹1,220 crore in the last five years towards bank guarantees given since 2008 to defaulter factories, while another ₹760 crore is outstanding. Yet, the cabinet gave its nod to the proposal to give a bank guarantee for loans given by the Maharashtra State Central Cooperative Bank (MSCCB) to sugar factories.
The MSCCB has offered the loan at 8 percent and a payback time of eight years. If the factories fail to pay off the loans, they will be recovered from the state government. The outstanding amount from six factories that had taken loans from MSCCB is ₹215 crore, while the outstanding from two factories that took loans from the National Cooperative Development Corporation (NCDC) is over ₹540 crore.
The government has received proposals from 13 sugar factories from the private and cooperative sectors for loans to the tune of ₹1,100 crore from MSCCB. “Factories that have no outstanding loans and whose net worth is at least one and a half times the loan amount are eligible for loans,” said an official from the cooperation department. “Apart from this, we have decided to fix liability personally on the directors, holding their personal assets liable for the loans. The state government is firm on this condition, which is expected to be opposed by the factories.”
When the issue of fixing liability on the directors was discussed in the cabinet meeting, the chief minister and both the deputy chief ministers were hellbent on the condition. “The properties of the directors will be attached by the government if the factories fail to repay the loan,” said an official from the department. “Deputy CM Ajit Pawar said there would be no compromise on this condition, and the factories were free to not opt for the loan option.”
The state government in July gave a similar guarantee to six sugar factories controlled by politicians from the ruling parties for loans amounting to ₹549 crore from the National Cooperative Development Corporation (NCDC). The sugar factories are under the control of BJP MLC Ranjitsinh Mohite Patil, BJP MP Dhananjay Mahadik, BJP leader Harshavardhan Patil, BJP MLA Abhimanyu Pawar and BJP union minister Raosaheb Danve.
“The NCDC loans come at an interest rate of 9.76 percent and are routed through the state government, fixing direct responsibility of the payment of loans and interest on the government. The MSCCB loan comes at an interest rate of just 8 percent, and the government is liable to repay the loan only if the factory fails to repay it,” said an official from the CMO.
In proposing to stand guarantee for sugar factories, the cabinet has overturned its own decision taken in January 2023 on the recommendation of the Rajgopal Devara committee, which was based on the history of default by factories in the past. “After the MSCCB moved the Supreme Court, the state government had to pay ₹1,220 crore as guarantor for loans taken since 2008,” said the CMO official. The official added that a similar decision was taken by the Maharashtra Vikas Aghadi government in 2021 to not give a bank guarantee to sugar factories.
Rajesh Kumar, additional chief secretary, cooperation department, said that the proposals that had been submitted by the factories would be scrutinised at the Sugar Commissioner level before being approved by the government.
