The factories believe that they will now be exposed to fierce competition from multinationals who will pump in huge funds with professionalism and hi-tech machineries. Maharashtra, with its 121 sugar factories contributing over 30 per cent of the country's sugar production, is likely to feel the brunt of the new policy announcement.

The factories in Maharashtra have already reached their optimum capacity as the available sugarcane is being fully utilised and there was no chance of increasing area under cane due to lack of irrigation facility.

The centre has already issued licenses to all the new 58 sugar factories comprising 22 for Eigth Plan and 36 in Ninth Plan. Maharashtra State Co-operative Sugar Factories Federation, a representative body of the cooperatives, has argued that with the delicensing, problems of the new co-operatives will be further relegated to the background and they will have no chance to see the light of the day.

Ironically, of the total 121 factories, 26 could not function during the 1997-98 crushing season for want of funds and sugarcane. The successive state governments have failed to take proper steps for the revival of 23 sick sugar cooperatives whose accumulated loss has crossed Rs 450 crore.

Experts feel that the delicensing will adversely affect at least 50 factories from North Maharashtra, Vidarbha and Marathwada regions.

In fact, the centre has "liberally" issued licences mainly out of political compulsions even in the drought prone areas where the possibility of canal water is not possible. The delicensing will add further fuel to the fire as the ruling Shiv sena-BJP government has already removed zoning restrictions on sugar factories thereby non-members are allowed to sale their sugarcane to any factory and a factory with an inadequate sugarcane can source it from anywhere.

At the all India level, as against the ninth plan target of 254 lakh tonnes, a capacity of 275 lakh tonnes has already been licensed. During 1991, the centre has even issued licences to the factories within the radius of 15 km. However, the implementation has been very tardy because none of the proposals are being scrutinised in the food ministry as in the past.

In fact, Maharashtra State Cooperative Sugar Factories Federation and the National Federation of Cooperative Sugar Factories have been campaigning for the continuation of licensing policy and have demanded that the licences pending with the centre should be kept in abeyance for the period of five years. Both the federations were aware that with the delicensing of sugar industry, the new units will not be entitled for incentives.

Both the federations' efforts had paid off when former prime minister HD Deve Gowda deferred the decision to delicense in the "larger interest of the farmers and cooperative sector as a whole." Gowda had also accepted their submission that despite issue of licence, the cooperatives were finding difficulties in raising funds from the financial institutions, the state and central governments and interim loans from the cooperative and commercial banks.

However, Indian Sugar Mills Association (ISMA), an organisation of sugar units, has been adamant on its demand to delicense the sugar industry. ISMA feels that there will be a vertical growth of sugar factories which have grown horizontally during licensing system. The observers feel that the chances of multinationals investing in either taking over sick factory or setting up of new ones were remote. At present the cooperatives evade income tax. Neither they give dividends nor show any profits. However, the multinationals will be compelled to pay income tax and give dividends and also show profits.