With the Maharashtra government declaring November 5 as the commencement of the crushing season in the state, the Maharashtra State Cooperative Bank (MSCB) has begun preparing for the disbursement of working capital loans to the sugar factories. The bank is expected to sanction R3,000 crore to R3,500 crore worth of working capital to 35 factories on its roll.
“There has been a delay in the declaration of the start of the season. Earlier, the season was expected to commence on December 1 and therefore, we had not received applications. However, the process will begin soon and the bank will finalise the working capital loans by the month-end,” Pramod Karnad, MD, MSCB, told FE. Last year, the bank had sanctioned R3,956 crore working capital to 35 sugar mills in the state. Since there are no mills on the bank client list that are in the negative net worth bracket, the bank is expected to sanction working capital to almost all its factories.
“Working capital loans are usually given for the period from November 1, 2016, to October 31, 2017. The pledge limit could range between R3,000 crore to R3,500 and as production begins, the mills will begin withdrawals as against production,” Karnad said. This time, the bank has decided to give a two-month extension limit since the season has begun late.
The bank has reduced its pre-seasonal loan amount by over 40% to R225 crore for the 2016-17 season, from R400 crore last year, due to the decrease in area under sugarcane. Firstly, the area under cane in the state has reduced and this will impact production. Secondly, the bank has become conservative,” he said. Usually, some sugar cooperatives that are financially strong do not avail pre-seasonal loans.