Sugar co-ops face govt action for loan default

Maharashtra government to hold directors of 31 sugar cooperatives accountable for loan defaults ahead of elections, risking board dissolution and property attachment.

MUMBAI: The state government has decided to take to task respective board of directors of 31 sugar cooperatives that were extended margin money loans (down payment) and have defaulted in paying back the first two instalments. The loans were disbursed to the cooperatives, linked to prominent politicians, in tranches ahead of the Lok Sabha election in August 2024, and thereafter in March 2025. The cumulative amount totals ₹4,355 crore.

Loans taken by sugar factories were not utilised for purposed mentioned in the applications, said the cooperation minister. (HT PHOTO)

Some of the sugar factories that have taken loans are controlled by top Maharashtra leaders -- Radhakrishna Vikhe-Patil (BJP), Harshavardhan Patil (NCP-SP), Shivendraraje Bhosale (BJP), Sanjay Mandalik (Shiv Sena), Hassan Mushrif (NCP), among others. The loan taken by each sugar factory is approximately between ₹40 crore and ₹300 crore. The government did not disclose who among them, or 26 others, were defaulters.

People in the know of things from the government have said if the money is not recovered in a month the government will dissolve the boards and recover dues by attaching personal immovable properties of respective directors – this was the norm in August 2023, which was diluted in subsequent years, and has been reinstated now.

The government stood bank guarantee for the margin money loan from National Cooperative Development Corporation (NCDC), controlled by the central government. The loan, at 9.46%, is lower than the market rate, and is given for eight years, with the actual repayment of the principal amount beginning in the third year of the disbursement. Factories are expected to pay interest on the loan for the first two years. Most have failed to pay the interest component, compelling the government to bear the burden.

Explaining the government’s move, the officer said, “If things are not set right, the burden of repayment of loans in the first two years will be over ₹350 crore, which will increase with time once the repayment of the principal amount begins.”

He added, strict norms were laid out following poor recovery from the factories. “Chief minister Devendra Fadnavis and deputy chief minister Ajit Pawar, who is also the finance minister, finally decided it was time for hard talk,” he said.

Babasaheb Patil, cooperation minister and NCP leader, said, “We have made it mandatory for sugar factories to first pay the FRP (fair and remunerative price) and the loans from selling the sugar produced from the season which ended last month.”

Patil added that the loan was not being used for the purpose it was taken – on upgradation of factories, setting up distilleries, etc. Most of it, he said, was utilised in paying salaries. “Stricter norms will help the government to restrict non-deserving factories from availing bank guarantee from the government.”

PR Patil, chairman, Maharashtra State Cooperative Sugar Factories Federation, found the state’s conditions unrealistic. “The state cannot dissolve the board of directors and mortgage immovable properties. It will it not stand in court,” he said.