State frames policy to dissolve cooperative sugar mill’s board of directors upon defaulting NCDC loans
Maharashtra has introduced rules allowing dissolution of cooperative sugar mill boards if NCDC loan repayments are delayed by a month, replacing them with administrators. Millers call the move harsh, citing delayed revenue cycles and rising costs. The policy aims to enforce financial discipline after past loan misuse, requiring stricter undertakings and accountability from directors and managing directors.
State govt has for the first time framed a policy that enables it to dissolve the board of directors of a cooperative sugar mill if it delays for a month in repaying loans taken from the National Cooperative Development Corporation (NCDC) and appoint an administrator to run the factory. NCDC gets funds from Centre’s cooperation ministry and disburses loans through govt, which acts as a guarantor. In the last financial year, 46 sugar mills in Maharashtra received 70 loans, called ‘margin money’ loans provided to address working capital needs, totalling Rs7,600 crore.State on March 3 appointed a committee under the sugar commissioner in Pune to carry out a study and suggest terms and conditions for availing of NCDC loans. Based on its report submitted on May 20, govt introduced the rules that were notified in June. Concerned, millers said directors, who are elected from farmer shareholders for a five-year term, can undoubtedly be made responsible for loan repayment. But the harsh measure to terminate their tenure midway for non-repayment will not serve the purpose of the cooperative sector, they said.Sharad Lad, chairman of Kranti Sugars Kundal in Sangli district, said govt should rethink the clause to penalise the directors by dissolving the board.
“The sugar industry is regulated by Central govt. The mills can make up the expenses only if the selling price of the sugar matches the ever-increasing cost of raw material. Also, ethanol prices need to be aligned with the expenses incurred to produce it from sugar cane,” he said.Ganpatrao Patil, chairman of Shirol’s Dutta Factory, said, “Mills pay farmers in one go, while we get the revenue as and when the sugar is sold. It may take months to realise the expected revenue, and therefore there should be relaxation with respect to the repayment of loans.”Experts claim that the stringent measures to recover loans stem from the lessons govt learned from Maharashtra State Cooperative Bank’s alleged scam.
The bank gave loans to sugar factories and other establishments associated with politicians without adequate collateral. The mills unable to repay were auctioned for private purchase. The new policy also stipulates that a sugar mill’s board of directors give an undertaking along with separate ones by each director for the recovery of loans. Besides, the managing director (MD) has been made responsible for ensuring that the terms and conditions of the funding are followed in letter and spirit. As per clause 33, the MD is required to provide a notarised affidavit on an Rs500 stamp to bring to the notice of the sugar commissioner’s office and state govt any wrongdoings by the board.Vijay Autade, a sugar industry expert, said, “Holding the board of directors and the administrative chief responsible for repayment of loans is to ensure financial discipline in the mills. It is for sure that some of the mills that got loans from NCDC are bound to default. However, the threat of losing the post could avoid wrongdoings, which would impact not just the mill but the farmers in the long run.”
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Source : The Times Of India
