, Edited by Defined Desk | Mumbai |
Up to date: September 25, 2020 7:41:51 am
The Maharashtra authorities on Tuesday (September 22) agreed to be the guarantor for 32 sugar mills to avail pre-season loans.
In doing so, the federal government diluted its personal norms for offering ensures to sugar mills, and burdened the cash-strapped exchequer with anticipated contingent liabilities of Rs 391 crore. The approval got here into drive on Thursday (September 24).
Why did the federal government agree to ensure the loans of those 32 sugar mills?
The federal government has argued that this was essential to “ensure that all the cane is crushed in time” in order that sugarcane farmers get the advantages. The state cooperatives division is anticipating a bumper cane crop this 12 months.
The choice was taken by a Cupboard sub-committee headed by Deputy Chief Minister and Finance Minister Ajit Pawar. The measure was necessitated to make sure that financially harassed sugar mills are in a position to function forward of the crushing season starting October 20.
The sugar trade has important clout with Chief Minister Uddhav Thackeray’s Maha Vikas Aghadi authorities, 16 of whose 43 ministers have direct hyperlinks with cooperative or personal sugar mills.
How does a authorities assure assist the mills?
The federal government assure is just for cooperative sugar mills. Ninety out of the 180 sugar mills which can be at present purposeful in Maharashtra are cooperatives; the remainder are privately owned. The federal government had acquired proposals looking for monetary assist from 38 of the 90 cooperative sugar mills.
After scrutiny, the federal government agreed to provide ensures to 32 of those mills. As soon as the federal government turns into a guarantor, the sugar mills can entry loans from the Maharashtra State Cooperative Financial institution or district cooperative banks. Within the absence of a state assure, these banks can not give loans to sugar mills with a damaging value, as per the rules of NABARD and RBI rules.
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Why is the mortgage essential, and the way will banks get well their cash?
The state authorities is a facilitator, however the onus of reimbursement lies with the sugar mills. However as soon as the mills take the loans from banks, they should repay them by Could 31, 2021. If there’s a surplus of cane for which an prolonged crushing interval is required, the reimbursement deadline might be prolonged till June 15.
The pre-season mortgage is essential for financially weak banks, which can not in any other case start operations. Forward of the crushing season, a large sum of cash is invested within the revival and administration of mills shut down after the earlier season. Extra importantly, the sugar mills should make advance funds to contractors who present the farm labourers.
Why are sugar mills in monetary issue?
A number of causes have been attributed. Mill homeowners typically complain that the centrally-mandated truthful worth renumeration to cane cultivators is unrealistic. However mismanagement and the shortage of transparency within the operating of the mills are critical issues.
The political class is deeply entrenched within the sugar trade, and there may be corruption, together with the diversion of loans from cooperative banks, and misuse of funds to serve private vested pursuits.
Value fluctuations within the worldwide market additionally affect the financials of the mills. Nevertheless, some 50-55 cooperative mills are making earnings.
In accordance with the sugar commissioner’s evaluation, some 170 lakh metric tonnes of sugarcane will likely be processed within the 32 sugar mills that the federal government has dedicated to assist. The necessary truthful worth renumeration to farmers is at present Rs 2,850 per metric tonne — which provides as much as Rs 4,800 crore for 170 lakh tonnes of cane, payable to roughly 2 lakh farmers.
Sugarcane cultivation in Maharashtra this 12 months is on 10.50 lakh hectares, and entails 20 lakh cultivators. Manufacturing within the present season is estimated at 815 lakh metric tonnes.
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