Today, 19 mills in the state that come under the two sectors face the prospect of going the National Textile Corporation (NTC) way as they sit on an accumulated loss of over Rs 700 crore. The extent of their financial mess can be gauged from the fact that they are currently paying the previous year's sugarcane cost by getting advance for the sugar which they hope to sell next year.

Almost all the mills incur loss at the operational level. Some of them have salary arrears while many have not initiated the annual off-season maintenance.

But these issues have not deterred the state government from announcing higher and economically unviable cane price year after year. Farmers constitute a significant vote base which no government in the state wants to ignore. Well aware of this, the farming community continues to make unreasonable demands and the government succumbs to it hoping for a windfall in the elections.

The private sector mills, in order to ensure that they do not fall prey to the policy of appeasement, obtained a stay in the Chennai High Court restraining the Tamil Nadu government from fixing any cane price for them.Vote bank politics is also preventing the government from taking any harsh decisions. The co-operative mill at Madurantakam near Chennai is a perfect example. Its losses will exceed Rs 100 crore this year and it needs at least another Rs 10 crore to commence crushing next month.

The state sugar department, which oversees the management of the mills in the sector, suggested that the mill be closed this season as the loss on account of closure will be far less than what it will incur if operated.By not crushing this year, a clear signal will also be sent to the farmers that rest of the mills would suffer a similar fate if they persist with unacceptable demands. The government, however, has decided to go ahead with crushing as closure, it feared, could have negative impact at the hustings.

Various politically-motivated measures have, however, left a gaping hole in the state government's finances. It has been forced to give ways and means advance (read `grant' as no mill has repaid the advance or is in a position to do so) of over Rs 275 crore in the last four years just to enable them pay the cane dues. But with state coffers running dry, bureaucrats are getting desperate. On the one hand they have no funds while on the other there is an urgency to settle the cane dues - lest it becomes an election issue.

This is why they hit upon the idea of taking advances from the state civil supplies corporation for future supplies. Last month they took an advance of Rs 36 crore for supply of sugar over and above the levy quota (Tamil Nadu requires more sugar than what is allocated by the central government for PDS distribution and this it procures at open market price from co-operative mills) till March 2001.

Now they plan to take 50 per cent advance from the civil supplies corporation for the entire levy quota for the January-March period. This is expected to rake in additional Rs 25 crore.

But the short-sightedness exhibited by the administration is unparalleled. The entire stock of the mills are pledged with the banks for meeting their working capital requirements which are fully drawn. The stocks cannot be released unless funds are credited to the bank. Having taken advance for future sales and distributed the same towards cane price, the mills have no other source of cash flow. The big question now is how will they get their stock released for delivery to the civil supplies corporation. The unstated but obvious motive behind this move seems to be postponing the inevitable. Unless the sugar prices increase substantially next year (which appears highly unlikely), it could well be the taxpayers' turn once again to satisfy the government's never ending desire to pamper the non-taxpayers.