In crackdown against non-payment of dues, Maharashtra co-op bank to auction 11 sugar mills

By: | Published: September 3, 2016 6:06 AM

Maharashtra State Cooperative Bank (MSCB) has floated tenders inviting bids for auction of 11 sugar mills in the state for their failure to pay back dues to the bank.

Maharashtra State Cooperative Bank (MSCB) has floated tenders inviting bids for auction of 11 sugar mills in the state for their failure to pay back dues to the bank.

According to managing director Pramod Karnad, these mills were not been able to pay their outstanding amounts to the bank, forcing the lender to take this step.

The bank had earlier invited bids for some of the mills, but failed to attract any buyer. So, the mills have been put up for auction again, Karnad told FE.

The total outstanding amount owed by sugar mills to MSCB is around Rs 362 crore. Two of the mills are in Aurangabad, two in Beed, and one each in Dhule and Wardha. These mills were not operational for the last couple of seasons.

Karnad said the bank had initially invited bids for seven mills and bids for another four mills were put up later. The process has been launched under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

The bank has launched the sale process for these units since these have defaulted on loan repayments. According to senior industry experts, if the mills are auctioned under the SARFESI Act, there is not much the government can do. The SARFESI Act gives the right to the secured creditor to recover dues, and in such an event, no special permissions are required from the government before putting up notices for auction.

The Maharashtra Cabinet had decided in September 2013 that the sick sugar co-operatives will not be sold to private sugar mills. The MSC bank, the main lender to co-operative institutes, had then sold a sick sugar co-operative, Ahmednagar Taluka Sahakari Sakhar Karkhana, to recover its dues. The bank had then floated tenders to give 13 sick cooperative sugar mills on lease.

As on date, some of the 11 mills that have been put up for auction also owe farmers in terms of the fair and remunerative price (FRP). As on August 31, the total FRP dues in the state stood at around R365 crore.

Sugar commissioner Vipin Sharma said hearings have been organised on September 6, where nearly 100 mills that have not paid 100% of the FRP dues have been called to explain their positions.

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