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Maha ready to offer guarantee to millers refused loans by banks

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Pune | Published: July 3, 2015 12:58:00 AM

Maharashtra has shown willingness to give government guarantees to those sugar mills that have been refused loans by banks...

Maharashtra has shown willingness to give government guarantees to those sugar mills that have been refused loans by banks, top officials said. Mills in the state, however, do not seem to be very enthused at the offer.

Now that the Centre has issued a Government Resolution announcing the R6,000 crore interest-free loans for mills across the country, the factories are now expected to come forward and submit the previous season’s production figures and documents related to payment of at least 50% fair and remunerative price ( FRP) to farmers following which the banks will conduct due diligence and decide on the loans, Vipin Sharma, Maharashtra sugar commissioner, said.

Sharma said the government is now willing to give state guarantee to mills that have been refused such loans by banks subject to the condition that a couple of promoters or directors of the mills offer their personal assets as collateral.

It may be mentioned here that the state government had stopped offering government guarantee to sugar mills after 2003 when a drought and crash in sugar prices led to loan defaults by mills and the institutions had invoked government guarantee.

Of the R6,000 crore package announced by the Centre, Maharashtra’s share comes up to R1,850 crore.

As per the notification that was issued last week, mills have been given time until July 31 to submit documents to banks for availing of the interest-free loans.

Sharma said that the FRP arrears had come down to R3,450 crore from R3,800 crore and the decision regarding giving government guarantee would be treated on a case to case basis. There will be no free ride for mills, however, he cautioned, adding that the assets of the directors or promoters will be required as collateral for mills to avail of these loans.

There are 9 mills in the state that have made less than 50% FRP payments to farmers and five of them have been issued Revenue and Recovery Certificate (RRC) orders, he said. RRC orders will be issued to the remaining 4 mills soon, he said, adding that a fresh round of hearings has been planned.

Last week, relenting to pressure from farmer organisations, the state government had agreed to take action against errant sugar mills and issue RRC orders.

Sanjeev Babar, MD of Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), said mill shave been seeking financial assistance and will slide into negative networth with such measures being taken by the government.

If a miller takes the loan, it still needs to be paid back by the end of the year. There are conditions attached and most mills will be unable to meet the 50% arrears payment clause, Babar pointed out. He said that the government offer would only add to the sugar mills’ burden as they have to anyway repay it with interest at a later stage.

“This kind of piecemeal solution is not going to help the industry come out of the mess. We were expecting a kind of financial package that will lead to a long-term sustainable solution,” he said.

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