OBC fraud: Simbhaoli Sugars says will honour payment commitments

OBC had sanctioned a loan amounting to Rs 1.48 billion in 2011 to the company for financing individual/joint liability groups, self-help groups and cane farmers in a tie-up under RBI scheme

With the Central Bureau of Investigation (CBI) registering a case against Simbhaoli on Sunday, on a complaint from Oriental Bank of Commerce (OBC) on fraudulent diversion of over Rs 1 billion, the Uttar Pradesh government is keeping its eyes open. 

“We are aware of the Simbhaoli development and are keeping an eye on the emerging situation. Even otherwise, we monitor sugarcane payments,” UP cane commissioner Sanjay Bhoosreddy told Business Standard.

He said the state government had no direct link with the CBI case, adding that if promoters and other senior officials are arrested in such cases, mills’ operations could come to a halt.

Meanwhile, a senior executive of the company, on condition of anonymity, said the CBI case would not impact its capacity to pay sugarcane farmers. “We have ample amount of sugar stock with us and as and when the sugar is sold in the market, we would pay farmers.” 

Centre-owned OBC, it is alleged,  had sanctioned a loan amounting to Rs 1.48 billion in 2011 to the company for financing individual/joint liability groups, self-help groups and cane farmers in a tie-up under a Reserve Bank of India (RBI) scheme. However, the money was diverted to other heads.

The company’s share prices fell 15.7 per cent on the BSE to close at Rs 14.2 a share. The exchanges have sought further clarification from the company on the case.

In the ongoing crushing season, Simbhaoli Group, which operates three mills in UP, has a sugarcane payment percentage of 44. The aggregate in the current season stands at 75 per cent.

Against the total payables of Rs 4.98 billion, Simbhaoli has paid Rs 2.2 billion. Without the 14-day payment window, total liabilities stand at Rs 5.67 billion. 

Cane arrears in UP have already touched Rs 47 billion in the current season, against total payables of over Rs 188 billion. If one does not count the statutory payment window of 14 days, total payables are Rs 215 billion.

In his first step after taking over as state cane development and sugar industries minister, Suresh Rana had in April last year convened a meeting of top defaulting mills, to apprise them of the government’s commitment on farm issues.

In the ongoing sugar season, 119 mills in the state, including 94 private units, had collectively produced almost 6 million tonnes of sugar to sustain about 4 million rural households.