The Maharashtra government’s decision to allow cooperative sugar mills to set up projects under the build-operate-transfer (BOT) and build-own-operate-transfer (BOOT) models is being projected as a measure to help financially stressed factories improve their income and clear pending cane payments. The policy is intended to attract private investment and technical support without adding to the financial burden of the mills, according to a report by Business Standard.
The policy was issued through an order dated February 26 by the state’s Cooperation, Marketing and Textiles Department. It outlines eligibility conditions, approval procedures and safeguards for projects to be developed with private participation.
However, farmers’ organisations have opposed the move, stating that allowing troubled cooperative mills to hand over by-product projects to private investors could weaken the cooperative movement. Farmer leaders said sugar factories are already under severe financial pressure due to rising management expenses, salaries, Fair and Remunerative Price (FRP) payments to farmers, harvesting and transport charges, and chemical costs. They pointed out that several mills and their by-product units are struggling to remain viable.
The development comes at a time when the sugarcane crushing season is nearing its end. Of the 206 sugar mills in the state, 103 have closed operations. Mills are yet to clear cane dues amounting to Rs 4,898 crore to farmers.
Under the new framework, cooperative sugar factories can partner with private developers to set up projects that process sugarcane byproducts such as bagasse, molasses and press mud. These materials can be used to establish co-generation power plants, distilleries, ethanol units, biogas and compressed biogas plants, hydrogen projects, sustainable aviation fuel units, carbon dioxide recovery facilities, bioplastics, organic chemicals and soil conditioners.
Maharashtra is one of the country’s largest sugar-producing states, and its cooperative sugar sector has played a key role in rural development. In recent years, however, many mills have reported continuous losses, negative net worth and limited borrowing capacity, restricting their ability to invest in new ventures.
As per the policy, a private developer will finance and construct the project and operate it for a fixed period, generally between five and 10 years, with the total term capped at 15 years. After the agreed period, the project will be transferred to the concerned sugar factory.
A cooperative mill will be considered financially stressed if it reports losses for three consecutive years, has a negative net worth for three years, exhausts its borrowing limit, receives an audit classification of “C” or “D” for three years, operates below 50 per cent of its crushing capacity for three seasons, or has outstanding government dues. Financially stable mills are also permitted to adopt the BOT or BOOT route. Before signing any agreement, the factory’s board must pass a resolution and obtain approval under Section 20(A) of the Maharashtra Cooperative Societies Act. A detailed project report prepared by a government-approved agency must specify capital costs, operational expenses, the payback period and expected returns.
Projects valued at up to Rs 25 crore, including taxes, can be approved by the Sugar Commissioner. Projects exceeding this amount will require state government approval. Developers will be selected through a transparent e-tender process and must deposit an interest-free security amount equal to one year’s lease rent. The lease rent for factory land will be fixed at the prevailing ready reckoner rate or the value determined by a government-approved valuer, whichever is higher.
The policy makes the private developer responsible for obtaining statutory approvals, environmental clearances, insurance and legal compliance. The developer will also be liable for labour law compliance, employee benefits, taxes and other financial obligations during the contract period. At the time of transfer, the project must be free of bank loans, unpaid wages, supplier dues and government liabilities.
In case of disputes, agreements will provide for discussion, mediation, arbitration and, if necessary, court proceedings. Contracts must include an arbitration clause. Developers who abandon projects, violate terms or face bankruptcy may have their agreements terminated, security deposits forfeited and may also face recovery of damages and blacklisting.
Factories will be required to submit quarterly progress reports, and projects will undergo independent audits by chartered accountants. Regional Joint Directors (Sugar) will conduct periodic monitoring.
The government has directed that income generated from BOT and BOOT projects be used first to clear government dues, including share capital, loans and statutory payments related to the FRP, before being used for other purposes.
