Maharashtra seeks time to recover loans from sugar co-ops

The Maharashtra government is planning to approach the Reserve Bank of India to extend the time limit for recovering loans from sugar co-operatives in the state.

Addressing the media, Jayant Patil, state finance minister, said: "We will write to the RBI requesting not to insist on guarantee invocation and give the urban co-operative banks more time to tidy up their finances."

The move is expected to save the state from a situation of invocation of guarantee it gave to these banks against their exposure to co-operative sugar mills. The guarantee amount stands at about Rs 300 crore.

The state government had guaranteed the loans disbursed by the co-operative banks to sugar mills in the co-operative sector. Due to widespread defaults in loan repayments, the banks are left with substantial non-performing assets which can invoke strict action from the RBI.

The minister is expected to meet the heads of the defaulting sugar co-oeratives in the next few days before approaching the RBI.

The government's approach, however, has triggered criticism across the industry circles in the region.

"Co-operatives make losses mainly because of mismanagement and financial mishandling by their directors. They get away with fancy 'revival packages', while genuine failures in the industry results in the closure of units," an industrialist in the region said.

Political activists too are not happy with the government move. "The sugar co-operatives eat up public money and go unscathed, while the same encouragement to the industry may work wonders in terms of added investments," a senior leader of the Nationalist Congress Party said.