Pawar play seen behind largesse to sugar co-ops

MUMBAI: Finance Minister Jaswant Singh’s decision to allow Maharashtra co-operative banks to convert their short-term assistance of Rs 1,588 crore into a medium-term loan has come as a big relief to these banks.
Political analysts believe hectic lobbying by the powerful state sugar lobby and especially by NCP strongman Sharad Pawar has resulted in this largesse. Thanks to Mr Singh, district and central co-operative banks can now convert their loans of Rs 1,588 crore to sugar co-operatives into a mid-term loan to avoid a short-margin situation.
Mr Singh, while presenting the budget on Friday, announced the decision allowing co-operative banks to modify their loans to sugar co-operatives. Political circles credit Mr Pawar for his role in the decision as he has been demanding a bail-out for the sugar industry. Vijay Kelkar, advisor to the FM, last month went to Baramati to discuss with the Maratha strongman the problems being faced by sugar co-operatives.
More than 70 sugar co-operatives have hypothecated their sugar stocks to the banks at the then-prevailing rate of between Rs 1,200 and Rs 1,300 per quintal.
When sugar prices fell sharply banks were confronted with a short margin situation. These banks — many of which are controlled by politicians with sugar co-operatives under their dominion — wanted Rs 1,500 crore to recover their costs from selling their sugar stocks at the prevailing rate.
“The centre has accepted our demand,� a senior functionary associated with the co-operative movement told ET. Of the Rs 1,588 crore a Rs 800 crore loan is to help co-operatives bridge this huge gap, sources said. The loan, earlier for a short period ranging from two weeks to a month, is now to be repaid in five years. But there is a rider. The conversion into a medium-term loan can take place only if the state government stands guarantee. The Maharashtra government has already agreed to stand guarantor for Rs 1,588 crore. If the co-operative fails to repay the loan, the state will have to clear the entire amount with interest.
The decision will benefit the Maharashtra State Co-operative Bank (MSCB), directly controlled by Mr Pawar, as it has contributed Rs 700 crore of the Rs 1,588 crore. Another Rs 700 crore is planned to be released to about 50 hand-picked sugar co-operatives, which have already run up huge losses because of mismanagement.
The Debt Recovery Tribunal-II recently went to the extent of attaching Mantralaya offices of the secretaries of co-operatives and textiles to recover Rs 50.69 crore from a state-backed loan given by the Infrastructure Finance Corporation of India to the Sindhkheda sugar co-operative in Dhule district. The co-operative is controlled by minister of state for labour Hemant Deshmukh.
Unfazed by the humiliation, the state leadership continues to offer sops to the co-operative sector. It has got approval from the Union finance ministry for funding of these co-operatives by the MSCB.