The Maharashtra government owes a staggering Rs. 1,874 crore to banks as a result of loan guarantees it extended to the powerful sugar lobby, which later resulted in defaults.

These findings in the Comptroller and Auditor-General’s report on the State’s finances for 2013 underscore the largesse extended to sugar barons who have historically controlled political power in the State. The report was recently tabled in the Assembly.

The CAG says cooperative sugar factories account for 72 per cent of the guarantees invoked from the government. Even worse, the guarantees were extended without enough scrutiny and were poorly monitored, according to the report.

“The government did not maintain any record for monitoring and control. This resulted in the accumulation of invocation claims of Rs. 1,874.87 crore in respect of 60 cooperative sugar factories alone,” said the report.

The government had guaranteed loans to 17 sugar factories which had already defaulted on earlier loan payments.

Critics say the nexus between sugar barons and politicians has resulted in the massive sops to this sector. “Most of the sugar barons are politicians, several of them Cabinet Ministers. So the Ministers keep giving money to their own factories,” says MP Raju Shetti, a farmers’ leader who has taken on the the sugar lobby.

Cooperatives Minister Harshavardhan Patil defends the guarantees. “These were given in keeping with government policies. And these are old guarantees. No new ones have been extended,” he told The Hindu .

The CAG report says between 1992 and 2010, the government had guaranteed loans worth Rs. 436 crore to 42 cooperative factories without executing any guarantee deed.

CAG report says sops were extended without scrutiny