As more bankrupt sugar mills are to be auctioned, Maharashtra steps up to ‘rehabilitate’

About eight bankrupt and loss-making sugar mills in Maharashtra will be auctioned soon and the State government might participate in the auction and take responsibility for running these mills instead of allowing private players to purchase . However, experts have questioned the State’s stand asking who is going to be held accountable for ruining co-operative mills. 

Deputy Chief Minister Devendra Fadnavis recently announced in the State Assembly that about 7-8 sugar mills are to be auctioned at low prices in the market. “Once again, the State is going to face losses and to stop this, the government has formed an Asset Restructuring Company (ARC). It is not that the government is going to take over any sugar mill. The State’s stand is to rehabilitate sugar mills that are being sold through ( auction) banks at low prices. These are our ( State’s ) assets. We ( State) have given 90 per cent amount ( to start mills) and guarantees ( to banks)”.

Through the ARC, the State government can also cover bankrupt government, private, public, and semi-government establishments. Maharashtra is the first State to set up ARC with RBI’s approval. The State has incorporated ARC with an initial capital of ₹111 crore from the State contingency fund.

In the last few years, one after one co-operative sugar mills are getting auctioned in Maharashtra, and farmers and farmer leaders have repeatedly alleged a “conspiracy” to convert co-operative mills into a private venture to grab assets of mills along with sprawling land packs worth multi-crore. For the last few years, loss-making sugar mills are being auctioned by the Maharashtra State Co-operative Bank (MPCB) to recover loans. However, the auctioning process has come under the scanner.

Who is accountable?

One of the former Managing Directors of a sugar mill and renowned experts in the sector while speaking to Businessline questioned the State government’s intentions.

“ The government is coming forward to rehabilitate sick sugar mills. It means that the State will rescue the sick sugar mill and allow culprits to go scot-free. Now, instead of the opposition leaders, ruling party leaders would be given charge of these mills once the State government rescues them,” he said.

He added that massive corruption by directors has ruined co-operaitve sugar mills that have landed in a financial crisis. Once mills default on loans, the MSCB then auctions the mills and the same politicians buy these mills in auction at the lowest price.

The NABARD report and the Bombay High Court in its verdict in 2019 have confirmed this modus operandi of sugar barons mostly from Nationalist Congress Party and Congress.

Now, rebel Shiv Sena leader and Chief Minister Eknath Shinde and his deputy Devendra Fadnavis want to keep control of the sugar sector by taking over sick sugar mills and repaying loans with government funds, say experts.

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