The sale of sick sugar units by Maharashtra State Cooperative Bank (MSCB) has triggered a controversy between two government bodies, with the state sugar commissionerate claiming the government is yet to receive its share of proceeds from sale of the units.
“MSC Bank owes the government some Rs 1,200 crore from the sale of 37 mills under the Securitization Act. The share capital of the government has to be returned to it after the sale since the amount was given to the mills at the time of erection. The commissionerate has written to the state government to intervene in this issue,” Vipin Sharma, Maharashtra sugar commissioner, said.
He complained the commissionerate was not kept in the loop in the entire sale process. Earlier this year, MSC Bank had begun the process of selling about 12 sugar mills. The bank, the main lender to co-operative institutes in the state, recently sold a sick sugar co-operative, Ahmednagar Taluka Sahakari Sakhar Karkhana, to recover its dues. It had floated tenders to give 13 sick co-operative sugar mills on lease. The bank expects revenues in the range of Rs 350 crore to Rs 400 crore from the sale. “Recently, Dalmia Bharat Sugar Industries acquired Ninaidevi SSK, a sick sugar cooperative in Maharashtra’s Sangli district, for Rs 24.32 crore through auction. As against the reserved price of Rs 19.38 crore, the sale price was Rs 24.32 crore,” Pramod Karnad, MD, MSCB, said.
On the issue raised by the sugar commissionerate, Karnad said the first priority under the Securitization Act is towards secured creditors. “In case of liquidation, workers’ dues are given. But the total priority is towards the bank which is the secured creditor in this case. So far, the bank has not been able to recover dues from the sale of such mills since there has been a loss. Had the sale proceeds been more, the bank would have been in a position to pay the dues,” he pointed out.
According to Karnad, the state owes the bank Rs 2,275 crore from government guarantees. The bank has been giving loans to mills against these guarantees, he added. The MSC Bank has so far invoked guarantee of Rs 225 crore from the state government and the remaining amount is still outstanding, he said. The bank had earlier conducted due diligence and had the units valued by independent consultants, including Icra, Mitcon and VGK Trueman. Based on the reports, the board of administrators fixed up a reserve price for each unit.
The bank says the state had given an affidavit to the high court that the bank should first sell the sick sugar mill under the Sarfaesi Act and then come to the government for revoking the guarantee given by the government to the sugar mill.
This season, MSC Bank has sanctioned working capital of Rs 3,135 crore to 30 odd sugar factories in Maharashtra with positive net worth for the sugar season of 2014-15. The bank has stopped providing working capital to factories with negative net worth. Last year, the bank had sanctioned Rs 3,200 crore working capital to sugar factories in the state. Earlier, there were around 11 factories with negative networth but that was in the period of 2011-12 and thereafter the bank has not been providing working capital to such mills.