Maharashtra Govt Gives Loan Lifeline to Cooperative Sugar Companies

The Maharashtra government reverses its decision, extending loan guarantees to cooperative sugar companies, benefiting many political leaders.

The state government's cooperative department issued a resolution on September 6. It reversed an earlier decision of not granting government guarantees to 'struggling cooperative sugar companies' on loans. According to this resolution, the Maharashtra State Central Cooperative Bank (MSCCB) will now provide them loans.

The interest rate is set at 8%, and the repayment period is eight years. If the loans are not repaid, the state government will bear the burden.

As many as 13 sugar companies in the private and cooperative sectors have submitted requests for loans totaling INR 1,100 crore. Loans are only available to factories with a net worth at least 1.5 times the loan amount and no outstanding loans. Additionally, directors' personal assets will also be held accountable for the debts.

The decision came after Ajit Pawar and eight other Nationalist Congress Party (NCP) leaders joined the administration on July 2. Currently, Dilip Walse-Patil from NCP heads the cooperative department.

This move is similar to an assurance given by the state government in July. Under that assurance, the National Cooperative Development Corporation (NCDC) had agreed to a loan at a rate of 9.46 per cent, amounting to INR 548 crore. That move benefited six sugar companies run by BJP MLC Ranjitsinh Mohite Patil, BJP MP Dhananjay Mahadik, BJP leader Harshavardhan Patil, BJP MLA Abhimanyu Pawar, and BJP union minister Raosaheb Danve.

In January 2023, the Shinde-Fadnavis administration decided not to guarantee bank loans. This decision was based on the Rajgopal Deora committee's findings about defaulting manufacturers. Before that, the Maharashtra Vikas Aghadi government had also decided not to give sugar factories bank guarantees for loans in 2021.

In the past, such defaults have cost the government more than INR 1,200 crore as sugar mills were unable to repay their loans. Another INR 760 crore of loans, which the government guaranteed, are yet to be paid.

There are six companies with loans from MSCCB that have outstanding loans of INR 215 crore. Whereas two factories have an outstanding balance of INR 540 crore in loans from NCDC.