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| In a climbdown from its earlier stand, the Maharashtra government has agreed to a one-time settlement of around Rs 170 crore to clear the outstanding amounts owed to financial institutions (IFCI, IDBI and IIBI) by cooperative sugar factories and spinning mills in the state.
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| This settlement will include the 100 per cent principal amount payable to the FIs as well as a 12 per cent simple interest on these outstandings.
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| ICICI Bank too went in for a similar one-time settlement with the state government to recover outstanding (defaulted upon) amounts by state cooperative units and was paid Rs 25 crore in December 2002, this being 100 per cent of the principal owed to it.
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| The state government is expected to formally issue a letter to this effect to the FIs (IFCI, IDBI and IIBI) in the next fortnight, according to sources close to the negotiations.
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| Of the Rs 170 crore (one-time-settlement), IDBI, the lead banker, will get around Rs 100 crore, with the remaining Rs 70 crore accruing to IFCI (Rs 50 crore) and IIBI.
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| According to an official, earlier negotiations had failed as the state government insisted upon a total waiver of interest and was willing only to pay the principal sum owed to these institutions, as it did in the ICICI Bank case.
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| The state government softened its position after the FIs took legal action. The Debt Recovery Tribunal (Pune) attached two state government treasury accounts and the Mumbai High Court froze Rs 119 crore held in one of these accounts (to recover the outstanding amount of Rs 80-odd crore owed to the FIs and banks by the Sindhkheda cooperative sugar factory).
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| State advocate general Goolam Vahanvati told the Mumbai High Court that he had advised the state to settle the outstandings with the FIs, while seeking a two-week adjournment of the hearings in the case.
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| IFCI has 23 cases pendings against the state government (which is a guarantor) for the outstanding amounts of principal and interest owed by cooperative sugar factories and spinning mills in Maharashtra. IDBI similarly has 21 cases while IIBI has around 9 cases.
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| If the FIs persist with their litigation to recover the total amounts owed (including simple interest and the contractual rate of interest) the state government would have been required to pay in excess of Rs 400 crore.
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| By agreeing to a one time settlement of 100 per cent principal and 12 per cent simple interest the state government would be saving in excess of Rs 150 crore as well as the continued litigation costs in these cases.
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| IFCI has 23 cases in all, including the Sindhkheda cooperative sugar factory for Rs 3.15 crore (principal) (where the suit sought, including interest, Rs 12.70 cr). IDBI which has 21 cases was owed Rs 7 crore (its suit sought Rs 25 crore).
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| Similarly, the Renuka Adivasi cooperative spinning mill owes IFCI and IDBI Rs 7.90 crore and Rs 17.90 crore, respectively.
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| The Vir Jagderao Cotton Producing cooperative spinning mill owes IFCI and IDBI Rs 3.85 crore and Rs 8.98 crore, respectively.
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| The Maharashtra Cooperative Spinning Mill owes IFCI and IDBI Rs 1.5 crore and Rs 7.04 crore, the Baramati cooperative spinning mill owes the FIs Rs 10.04 crore and Rs 9.73 crore, respectively. |
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