Panel to study dues to be paid to Maharashtra co-op banks that lend to sugar mills

Over the last few years, drought and decreasing sugar sales have impacted the financial health of sugar mills, which are now not in a position to raise new capital from the banks.

The state government of Maharashtra has set up a high-level committee, led by principal secretary (financial reforms) Rajgopal Deora to ascertain the exact amount to be paid to cooperative banks that had issued loans to several cooperative sugar and spinning mills despite negative NDR (net disposable resource).

The government had stood in as the guarantor for the loans since the RBI and NABARD norms clearly state that mills with negative NDR cannot be given loans.

As many as 57 cooperative banks had taken loans from the Maharashtra State Cooperative Bank (MSCB), Mumbai Bank and Nanded and Osmanabad district central cooperative banks where the government was the guarantor and had failed to repay the loans.

As the mills defaulted in payments, the government will now repay these loans, AR Deshmukh, MD, Maharashtra State Cooperative Bank, and one of the members of the committee said. According to senior officials, the amount works out to nearly Rs 3,000 crore.

Over the last few years, drought and decreasing sugar sales have impacted the financial health of sugar mills, which are now not in a position to raise new capital from the banks. The Maharashtra State Cooperative Sugar Factories Federation has repeatedly asked the state government to stand guarantee for such mills so that they could raise fresh finance from banks. The state government, in turn, had asked mills for a proposal to consider their pleas to grant government guarantee, so that they are able to raise capital for the upcoming season.