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HomeIndustry & UpdatesMaharashtra co-operative fraud: Endgame for co-operative sugar factories?

Maharashtra co-operative fraud: Endgame for co-operative sugar factories?

Of the about 175 registered co-operative sugar factories in Maharashtra, only 95 crushed cane in the 2020-21 sugar season. Over 54 per cent of co-operative mills remained dysfunctional.

Directors of majority of the mills say that they will not be able to start crushing next year owing to the huge losses incurred.

In 2018, of the 178 registered co-operative sugar mills, only 101 started crushing operations. Of these 80 reported a total loss of ₹4,175 crore. In 2019, of the 102 operating mills, 59 mills reported a loss of ₹2,474 crore.

The overall profit earned by the remaining mills in 2018 and 2019 was a meagre ₹188 crore and ₹399 crore, respectively. In the 2020-21 season, mills predict more losses and lower profit margins.

Read also: Maharashtra co-operative fraud: How co-op sugar mills become private properties

Now, 57 co-operative sugar factories have expressed inability to repay loans of about ₹3,000 crore taken from Maharashtra State Co-operative Bank (MSCB), Mumbai Bank, and Nanded and Osmanabad District Central Co-operative Banks. The State government, a guarantor to these loans, has set up a committee to draft an action plan for the loan payment.

In 2020, the Maharashtra government passed a resolution to frame criteria to rejuvenate non-operational sugar mills and their allied units on a hire, partnership or collaboration basis.

Shift to private mode

A senior government official said that either the State government will have to repay the debt or the banks will have to auction the mills.

“All these mills are dominated by politicians, who also have a say in the government and the banks. So, it is their decision on what they want to do with these mills.

“It is not just about mills, but also their control on huge land parcels that the mills have acquired at a subsidised price,” he said.

Read more: How politicians are pocketing sugar mills and their vast lands

A former director of Sangli-based Vasantdada Co-operative Sugar Mill, one of the oldest in the State, said the factory is being run by a private company as the directors failed to pay bank debt. The mill stands on a sprawling 400 acres in a prime locality in Sangli city and has land parcels in other places.

“The damage caused by mismanagement, corruption, overstaffing, absence of professional approach and the high cost of working capital is huge. Co-operative sugar factories in the State are on the deathbed. In the next few years, there will be more private factories operating in the State compared to co-operative mills,” he said.

About 164 mills crushed sugarcane in 2010-11. Of these, the number of private mills was 41 (25 per cent). In the recently-concluded 2020-21 sugarcane season, out of the 190 operating mills, 95 (50 per cent) were private mills.

Bitter politics

All farmer leaders say that sugar barons have looted farmers and fuelled their own political ambitions by using the co-operative money for elections.

They say that mills make losses not because they have to pay higher Fair and Remunerative Price (FRP), but because of mismanagement. Co-operative mills and sugarcane farmers in Maharashtra have frequently locked horns over the timely payment of the FRP.

Just ahead of the 2019 State elections, many sugar sector bigwigs, who enjoyed power in the Nationalist Congress Party and Congress regimes, joined the BJP camp sensing the direction the wind was blowing. Many contested and even won as BJP candidates.

“As the Enforcement Directorate has initiated a probe against mills and the Centre has established a new Ministry of Co-operation under Amit Shah, many sugar barons who are under the scanner might shift their loyalties to the BJP,” says political observer Mohan Patil.

Nationalist Congress Party (NCP) President Sharad Pawar, who single-handedly controls Maharashtra’s sugar politics, recently met Prime Minister Narendra Modi regarding the ongoing turmoil in the State’s co-operative sector. This is likely to be the beginning of a new political realignment in Maharashtra.

After all, the BJP is not able to digest the fact that Maharashtra has slipped out of its hands despite being the single largest party the Assembly and the NCP cannot afford to put its sugar satraps under the ED scanner, Patil added.

The above news was originally posted on www.thehindubusinessline.com

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