How Dirty Politics Ruined Maharashtra’s Sugar Co-operatives
In 1980, shortly after her return as Prime Minister, Indira Gandhi visited Maharashtra. The state was under the rule of the president, assembly polls were approaching, and dissenting factions threatened the prospects of Congress. So Indira enlisted the help of a regional strongman with deep grassroots ties – Vasantrao Patil.
Patil, then 62, was a pioneer in the state’s thriving cooperative sector. He controlled many cooperative institutions – from banks and credit societies to sugar mills and fertilizer factories. As the election approached, Patil and his wife, Shalini – supporters affectionately called them Vasant dada and Shalini tai – leveraged their influence in the cooperative sector, helping Indira and Congress regain power in the state.
Fast forward to 2022. Maharashtra’s cooperative movement, which Patil once raised as a baby (the couple had no children together), is in dire straits. There are allegations that corruption under Congress-NCP rule from 1999 to 2014 crippled the once-thriving sugar cooperatives. The allegations have led to a political confrontation – between the opposition BJP and the Shiv Sena’s ruling Maha Vikas Aghadi (MVA) coalition, the NCP and Congress – the outcome of which may impact 2024 Lok Sabha polls. .
At the center of the political battle is the Enforcement Directorate (ED), which is investigating allegations that the sale of indebted cooperative sugar mills to private entities resulted in a Rs 25,000 crore loss to the Treasury audience. According to ED documents seen by THE WEEK, at least a dozen of these mills were grossly dumped and then sold to private companies owned by politicians and their kin. The ED says it is investigating a conspiracy ring and uncovered incriminating financial transactions, acts of omission and commission, and a corrupt connection between various cooperative banks.
The agency took its first step in July 2021, when it attached Jarandeshwar Sugar Mills Private Ltd, a major sugar producer in western Maharashtra which Shalini Patil had started as a cooperative unit in 2000. The agency alleges that the business, which had defaulted on a loan from the Maharashtra State Cooperative Bank, was sold to a shell company started by relatives of a politician, at a price well below the market rate. The ED says Ajit Pawar, deputy chief minister and nephew of NCP leader Sharad Pawar, was a member of the MSCB board that cleared the sale.
Pawar denied the allegations, saying the plant had been sold as instructed by the Bombay High Court and that he was in no way related to the company that won the tender. “The allegations against me are politically motivated,” he said.
Shalini Patil, however, is unconvinced; she wants to repossess Jarandeshwar Sugar Mills. “I demand that the factory be returned to us because we have the most shares and I am the original owner,” she told THE WEEK. “It is high time action was taken against those who have been involved in corruption.”
According to Congress leader Sachin Sawant, the ED accusations were part of the BJP’s efforts to destabilize the MVA government. “Cooperation, which was a state subject, was absorbed by the Modi government as a separate department under Union Home Minister Amit Shah,” he said. “For the first time in the country’s history, the ED is managed by [the home minister] instead of the Union Ministry of Finance.
Sawant, however, admitted that loans taken out by several cooperative factories had become non-performing assets. “I’m not saying there aren’t negatives,” he said. “We can certainly improve the system if there are irregularities. But calling it a scam and going after opposition leaders is not fair.
ED investigators say those elected to lead the cooperatives are often affiliated with certain political parties. The elected members apparently not only mismanaged the mills, but also embezzled funds and defaulted on their commitments. To recover the money and reduce the non-performing assets, the MSCB gradually attached itself to several factories and began to sell their assets. It is alleged that some politicians and their relatives colluded with MSCB officials to buy these mills at ridiculous prices.
According to 90-year-old Shalini Patil, Maharashtra’s sugar industry had become fertile ground for ballot-banking politics. “Vasant dada asked me to go to Satara, to my father’s house, to help local farmers by starting the [Jarandeshwar] Cooperative sugar mill. Today I fight to save his legacy,” she said.
On January 24, activist Anna Hazare wrote to Trade Union Cooperation Minister Amit Shah to tell him that 47 cooperative sugar factories had been sold to individuals at “ridiculous prices”. He alleged that the government suffered a loss of Rs 25,000 crore on the sale of 32 sweets. “My view is that these sweets…deliberately got sick,” Hazare wrote. “These mills relied on the deposits and accumulated social capital of poor farmers, and the land donated by the farmers was burdened with illegal loans taken out by the board of directors. At the end, [the mills] were sold at scrap prices. How the sale went… [is] a massive scam.
According to the ED, the ownership structure of cooperative sugar mills benefits the rich and powerful at the expense of farmers. Says Vitthal Divekar, farmer and shareholder of Bhima Patas Cooperative Sugar Factory at Daund in Pune district: “The owner of a farmers factory should be a farmer, not an MP. No political party should be involved in the work of a factory.
The Bhima Patas factory, which was once one of the largest in the state, has been down for years. It now risks being converted into a private mill. “Our factory is closed and nearly 1,000 workers have lost their jobs and benefits,” said Namdev Takawane, a former manager. “It is closed not because of the non-cooperation of farmers or workers, or lack of raw materials. It was closed with the intention of turning it into a private factory.
Pramod Karnad, former chief executive of the MSCB, said the cooperative sugar sector was plagued with systemic problems. “Sugar is a cyclical crop; it goes wrong every four or five seasons. The cost of sugarcane, labor, chemicals, harvesting and transportation involves costs [that result in] farmers suffer losses. This is when politicians step in,” he said.
The establishment of the Union Cooperation Ministry last year has brought new hope to farmers, mill owners and other stakeholders. They expect the Union government to request a report from the state government and provide generous loans to restart shuttered factories. After all, the Center and the State cannot afford to turn a blind eye to the crisis – it will not only impact Maharashtra’s economy, but also India’s sugar exports.
The link between Maharashtra politics and the cooperative sugar sector eerily mirrors the bittersweet relationship between Vasantrao and Shalini Patil. After helping his wife win her first assembly polls in Satara, a sugar cooperative stronghold, Patil apparently wanted her to maintain a low profile. “He propelled me to the fore to run co-ops and fight elections, but he didn’t really believe in women’s rights,” Shalini said. “He got anxious after I started getting a lot of attention, way more than he initially wanted.”
The couple have separated over the years, but she is now fighting to save her late husband’s legacy. “Today I am the oldest politician in Maharashtra who knows what the cooperative sector is suffering from,” she said.
Is there a cure for the disease? Patel said she was confident the state’s cooperative sector would eventually bounce back “like a phoenix”; but first, the sugar policy will have to be reduced to ashes.