Sugar mills plan to sell shares to farmers

Written by Nanda Kasabe | Pune | Updated: Oct 26 2011, 08:46am hrs
Should this experiment succeed, cooperative sugar mills in Maharashtra could raise funds from the market by selling their shares to outside farmers who live in the same region. The Shri Chhatrapati Shahu Cooperative Sugar factory in Kolhapur has approached the state government to find out if the factory could adopt this route to raise finances for expansion. Unlike cooperatives, mills in the private sector have the option of going public through an initial public offering (IPO).

Vickramsingh Ghatge, founder and chairman of the sugar mill who recently headed a committee appointed by the state government to find ways and means of improving efficiencies in sugar mills, told FE that mills with positive net worth should be allowed to raise finances by selling shares to farmers at the market value. This would allow the mills to improve liquidity and also increase borrowing capacity, he said.

A proposal submitted to the government by the mill states that farmers who are within the jurisdiction of the mill and do not own agricultural land should be allowed to buy shares at market value. As per the existing laws, mills cannot go to the open market to raise finance. Cooperative sugar mills also cannot get listed on the stock exchange and therefore this option could turn out to beneficial for mills who have repaid all their loans. Moreover, farmers who have been with the mill for a long period should also get some benefits for being with the factory for a long time, Ghatge said.

Right now what is happening is even if there is a mill available for sale, 90% of such mills are sold to the private sector and cooperatives cannot bid for such mills for the want of funds, he pointed out. For this an amendment would be required in the existing act would be required to allow this sort of new pricing, he added. Ghatges mill has a net worth of R200 crore and regularly pays income tax.

Harshawardhan Patil, state cooperation minister, said that his department had received a proposal from the mill and the government was taking a serious look at it. The government has held a couple of meetings with the sugar mills. The proposal is under consideration. This would also mean that the mill would be run like a professional organisation although it would not end up losing its entity as a cooperative body.