Maharashtra govt to introduce soft loan scheme, by-product policy for cooperative sugar mills

Mumbai: In a major move to provide financial stability to cooperative sugar factories and ensure timely payments to sugarcane farmers, the Maharashtra government is set to introduce a 'Soft Loan Scheme' modelled on the Central government's policy framework. Deputy Chief Minister Sunetra Pawar has directed officials to immediately present a formal proposal before the State Cabinet for approval.

Under the proposed scheme, eligible cooperative sugar mills will have access to a low-interest soft loan corpus of approximately Rs 2,000 crore. The loans will carry a 7-year repayment window, with the state government bearing the annual interest burden of roughly Rs 100 crore. The funding will be funnelled through District Central Cooperative Banks (DCCBs) and the Maharashtra State Cooperative Bank (MSCB) after reviewing each factory's crushing capacity and financial health.

The decision comes at a critical time when state sugar mills are facing severe financial distress, owing around Rs 200 crore in Fair and Remunerative Price (FRP) dues to farmers from the previous crushing season. The liquidity infusion aims to enable mills to clear pending arrears and prepare seamlessly for the upcoming crushing season.

To reduce the industry's reliance on raw sugar production and improve overall financial viability, the Deputy Chief Minister also directed the formulation of a standalone, comprehensive policy dedicated to sugar by-products. This roadmap aims to accelerate manufacturing and processing capabilities across alternative revenue streams, including solar power, co-generation electricity, 1G and 2G Ethanol, Compressed Bio-Gas (CBG), Green Hydrogen and Sustainable Aviation Fuel (SAF).

Speaking at a high-level review meeting held on Tuesday, Deputy CM Pawar stated that diversification into value-added by-products will build long-term economic resilience, create new revenue channels, and protect sugarcane farmers from seasonal price volatility.

Sources at the cooperative sugar factories hailed the government's move saying that the factories face rigid payment timelines under the Fair and Remunerative Price (FRP) framework set by the central government, which requires paying farmers within 14 days of cane delivery. Mismatches between domestic sugar sales realizations and FRP obligations routinely cause working capital shortages and farmer arrears.

Sugarcane occupies roughly 4 per cent of Maharashtra's cultivated land but consumes over 60-70 per cent of the state's irrigation water, leading to regional debates over crop diversification and drip irrigation mandates. Overproduction in bumper years depresses domestic prices, requiring state and central intervention (such as export quotas and soft loans) to prevent default on farmer payments.

Sources said that to reduce exposure to volatile sugar prices, mills are shifting towards integrated biorefineries. Converting B-heavy molasses and direct sugarcane juice to ethanol under India's Ethanol Blending Program (EBP) provides faster liquidity than white sugar sales. Burning bagasse (cane fiber leftover) to generate renewable power for internal use and grid supply.

Moreover, expansion into Compressed Bio-Gas (CBG), Green Hydrogen, and Sustainable Aviation Fuel (SAF) aligns with state plans to modernise factory revenue models beyond raw sugar production.

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