Banks sanction Rs 2,559 crore: 49 of 172 Maharashtra sugar mills fail to get soft loans

Parthasarathi Biswas
Industry insiders said the fate of the 49 mills who have failed to get their soft loans sanctioned, despite the cane commissioner issuing the necessary certificates to them, remains uncertain. (File Photo)

As many as 49 mills out of 172 have had their applications for soft loans rejected, with banks in Maharashtra sanctioning a total of Rs 2,559.02 crore in loans till the end of June.

Alarmed by the inability of sugar mills to pay their growers the basic Fair and Remunerative Price (FRP) for the cane purchased, the central government had in March announced a soft loan scheme. The Rs 10,540-crore loan was to see banks lending to mills at a rate of 10.50 per cent, and mills, in turn, would utilise the same to clear their FRP dues.

Banking hurdles, however, had held up both the sanction as well as disbursement of the loans, with financial institutions pointing to factors such as the mills exhausting their credit limits and the sectoral exposure limit for sugar. Originally, the deadline for sanction of the proposals was May 31, which was later extended to the end of June.

Of the 60 proposals received by Maharashtra State Cooperative Bank (MSC) Bank, only 45 were sanctioned, while of 61 proposals received by district central cooperative banks (DCCB), 55 were sanctioned. Similarly, Nationalised Commercial Banks sanctioned 15 of 37 proposals, while urban banks gave their nod for 7 of 13 proposals. Of the sanctioned Rs 2,559 crore, mills have till date received Rs 2,510.64 crore.
Meanwhile, the soft loan has helped mills accelerate their payments to growers. As of July 15, of the Rs 23,173.29 crore that mills had to pay, a total of Rs 22,367.53 crore has been paid. This leaves dues of around Rs 807.76 crore pending about 3 per cent of the total payable.

Industry insiders said the fate of the 49 mills who have failed to get their soft loans sanctioned, despite the cane commissioner issuing the necessary certificates to them, remains uncertain.

Maybe such mills will have to turn to private lenders or look at underselling their stock to raise capital to pay their farmers. In extreme cases, they can ask the sugar commissioner to seize their stock and auction it off to pay the growers, said a miller from Pune.