State to curtail sops to co-operatives

It looks like the honeymoon period for co-operatives is about to end. Sops being offered to sugar co-operatives that have become fiefdoms of politicians may soon be curtailed.

It looks like the honeymoon period for co-operatives is about to end.

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Sops being offered to sugar co-operatives that have become fiefdoms of politicians may soon be curtailed.

The State Finance Commission, a body that advises the government on the state’s finances, has recommended that the state government stops extending guarantees for loans taken by co-operative factories and amends the relevant laws to ensure severe punishment for misappropriation of funds in these units.

The report is likely to come up before the state Cabinet for approval on Wednesday or next week. This policy, if adopted, could ensure more control over politicians who use co-operatives as tools to run their political empires.

“Finances of many of the sugar factories are in bad shape due to mismanagement. They get loans due to guarantees extended by the state government,” said an official, who did not wish to be identified because the subject is on the Cabinet’s agenda.

“If the co-operatives default on payments, taxpayers’ money that will be spent to repay their debts. It is time to stop this.”

Every year, the state government gives a counter-guarantee for loans taken by sugar co-operatives and cotton spinning mills, mostly controlled by politicians from the ruling Congress and Nationalist Congress Party.

The Comptroller and Auditor General’s report for 2009 on the state’s finances had pointed out that there was “an inherent risk of invocation of government guarantees which the state would have to honour out of its finances”.

The state is already reeling under a debt of Rs 1.85 lakh crore. Finance Minister Sunil Tatkare said he did not want to discuss the issue at this juncture. The co-operative sector in Maharashtra still largely forms the backbone of the rural economy. There are 201 co-operative sugar factories and 166 spinning mills.

Although co-operatives changed the face of western and central Maharashtra, there have been many instances of politicians siphoning off the money given by the government as loans or financial assistance.

Many factories are also sick due to mismanagement.

Critics are not sure how serious the government is about acting on the State Finance Commission’s report.

“The government should adopt the recommendations and implement them,” said Bharatiya Janata Party legislator Vinod Tawde.

“Over the years, financing co-operative factories has become a tool for funding politicians in the name of farmers.”