Maharashtra Finance Officials Red Flag Mahayuti’s Favour To Deputy CM Ajit Pawar Related Sugar Factory

The Finance Department officials in the state secretariat of Maharashtra have been trying to keep a check on the ruling Mahayuti government’s pre-assembly poll spending spree.

After raising objections on the popular Mukhyamantri Ladki Bahin (MLB) Scheme entailing a yearly burden of Rs 46,000 crore, senior officials in-charge of the exchequer have now red flagged the state government’s decision to relax stringent clauses pertaining to loans sought by the co-operative sugar factories.

As per a Loksatta report dated 1 September, 2024, the state government in a recently held cabinet meeting resolved to issue a diktat to the Maharashtra State Co-Operative Bank (MSCB) to make an exception to the Shri Chhatrapati Co-Operative (SCC) Sugar Factory from placing collateral at par with the principal amount sought as loan.

The Bhawani Nagar based sugar factory in Pune District is one of the five co-operative sugar factories closely related to Mahayuti's elected representatives in the state as well as in the centre which were advanced loans worth Rs 631 crore last year. The SCC Sugar Factory in the spotlight now then received a loan of Rs 128 crore from the MSCB.

At present, the factory is governed by an elected panel comprising close confidantes of the Nationalist Congress Party (NCP) Chief and Deputy Chief Minister Ajit Pawar. The governing body of the factory includes NCP leader Dattatray Bharne, Deputy CM's loyalist and Legislator from Indapur.

Apart from the SCC, the Malegaon Co-Operative Sugar Factory near Baramati and the Someshwar Co-Operative Sugar Factory near Nira, both in Pune district, are at present operated by those closely related to the Deputy CM Pawar.

The cabinet also reportedly agreed on asking the apex co-operative bank to provide a leeway to the sugar factory from the obligation to submit a no-objection certificate from other creditors.

The Finance Department officials are said to have pointed out that if the factory fails in repaying the loan, the burden of repaying Rs 128 crore will be then transferred to the state government as the latter stands as the guarantor whenever co-operative sugar factories seek loans from the MSCB.

As per statistics provided by the Union Government’s Department of Food and Public Distribution for FY24, the three co-operative sugar factories currently administered by close confidantes of Deputy CM Pawar were among those who received the largest share of loans in the state and were also included in the defaulters list.

For instance, the SCC Sugar Factory alone received a loan of Rs 511.10 crore for modernisation and co-generation related works, of which Rs 27.85 crore were due as on the last day of the previous financial year.

Concerns Regarding Pre-Election Largesse And Rising Debt

Notably, the Finance Department officials deciding to strongly express their concerns on the ruling government's large expenditure related decision has attracted significant attention since the NCP leader Pawar apart from being the Deputy CM also hold the Finance portfolio.

The Mahayuti has announced a slew of welfare schemes anticipating a challenging state assembly election in November, 2024.

According to a source in the state's Planning Department, the fiscal burden of the MLB scheme which involves a monthly handout of Rs 1,500 to all women below the poverty line (BPL), the Annapoorna Scheme guaranteeing three free refills of gas cylinders along with other similarly envisaged schemes will amount to nearly a lakh crore every year.

This has compelled the state Finance Department officials to express concern, especially regarding the estimated expenditure on the monthly handouts for BPL women, as the total debt obligation on the state exchequer as of FY24 stood at Rs 711,278 crore.

This is said to be the second highest debt obligation state-wise after that of Uttar Pradesh which was seen at Rs 7,47,545 crore in the recently ended financial year.

As per the source, senior exchequer officials resolved to assert their opinion for the second time now in case of loans extended to the co-operative sugar factories as failure on their part to repay loans would not only mean an additional burden for the state's treasury but would also hamper the MSCB's financial health.

This is so because the latter, which extends loans to several co-operative enterprises in the state, in turn borrows from the National Bank for Agriculture and Development (NABARD) at regular intervals to augment its credit supply capacity.

In terms of the political economy, extending loans to the co-operative sugar factories in the state is always a challenging task for the ruling governments.

This is not only because the co-operatives are crucial to the state's economy but also because their collapse owing to paucity of funds can have dire political ramifications during elections in the rural areas.

Considering this co-relation and the upcoming state assembly polls, earlier this month the ruling Mahayuti approved to make the state government guarantor in a fresh tranche of loans sought by 11 co-operative sugar factories amounting to Rs 1,590 crore.

Almost all of these loan seeking factories are administered by panels closely related to the Mahayuti leaders.

Several co-operative sugar as well as spinning mills governed by leaders from the Congress and the undivided NCP of the past defaulting on loans was one of the major issues consistently raised by the Bharatiya Janata Party (BJP) leaders while it was in power between 2014 to 2019 along with the undivided Shiv Sena of the past.

However, the BJP leaders in the state can be seen to have sidelined the criticism ever since a few Congress leaders associated with the co-operative sector joined the party and notably after the Ajit Pawar led NCP joined the ruling coalition last year.