Mumbai, A bank guarantee of ₹10 crore has been mandated for sugar mills in Maharashtra operating on a lease or partnership basis to ensure the timely payment of Fair and Remunerative Price to sugarcane farmers, officials said on Monday.

The state Cooperation Department’s decision aims to secure FRP dues during the crushing season, though concerns have been raised that the amount may be inadequate given the scale of operations of most such mills.

According to officials, many cooperative sugar factories are financially stressed and have been given on lease or partnership under norms based on provisions of the securitisation law. While eligibility criteria for operating such mills had been laid down earlier, there was no clear mechanism to ensure timely FRP payments.

Under the new decision, at the time of entering into lease or partnership agreements and while applying for crushing licences, the company or agency taking over the mill or another sugar factory will have to furnish a minimum bank guarantee of ₹10 crore in the name of the Sugar Commissioner.

If FRP is not paid on time during the crushing season, the dues of cane suppliers, along with interest for the delayed period, will be recovered from the bank guarantee. Any balance amount remaining after settlement of FRP dues will be returned after the end of the crushing season upon submission of a no-dues certificate, officials said.

They added that district collectors have been empowered to invoke the bank guarantee to ensure payment of FRP.

The order also provides that in case of default, coercive action cannot be taken against the immovable and movable assets of the original cooperative sugar factory. Instead, recovery proceedings, including attachment, may be initiated against the movable and immovable assets of the operating agency or company, as well as against sugar, molasses, bagasse and other by-products produced by the mill.

Commenting on the decision, farmers’ leader Raju Shetti said the move was welcome but the guarantee amount should be much higher.

“Most cooperative sugar factories in the state are financially sick and have been given on lease. Their crushing capacity ranges between 3,000 and 5,000 tonnes per day. They have to pay at least ₹100 to ₹150 crore as FRP. In such a scenario, a ₹10 crore bank guarantee is too low and should be increased,” Shetti said.

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