Maha allows BOT/BOOT projects to help revive sick cooperative sugar mills

A new Maharashtra policy allows cooperative sugar mills to monetise by-products through BOT/BOOT projects with private investors, aiming to diversify revenues and strengthen finances

To revive economically struggling cooperative sugar factories and help them generate additional revenues, the Maharashtra government approved a comprehensive policy.

 

This policy allows these factories to establish sugarcane by-product processing projects through private investors under the Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT) models. These by-products include bagasse, molasses and press mud. 

According to a Government Resolution issued by the Cooperation, Marketing and Textiles Department on February 26, detailed eligibility norms, approval processes and safeguards for projects to be developed through private investment without adding to the financial burden of sugar cooperatives have been laid out. 

Maharashtra is among India’s largest sugar-producing states, and the cooperative sugar sector has historically been central to rural economic development. 

 

However, several mills have been grappling with accumulated losses, negative net worth and exhausted borrowing limits, constraining their ability to invest in value-added projects.

 

The new policy seeks to unlock value from by-products such as bagasse, molasses and press mud, the official order explained.

 

These can be used to set up co-generation power plants, distilleries, ethanol units, biogas facilities, compressed biogas (CBG) plants, hydrogen projects, sustainable aviation fuel (SAF) units, carbon dioxide recovery plants, bio-plastics, organic chemicals, soil conditioners and other downstream ventures.

 

As per the order, under the BOT/BOOT framework, a private developer will build the project at its own cost, own and operate it for a fixed period — typically 5 to 10 years — and transfer it to the sugar factory at the end of the concession period. The agreement tenure, however, cannot exceed 15 years.

 

Eligibility and safeguards

 

The order said a cooperative sugar factory will qualify as financially stressed if it meets any one of several criteria, including accumulated losses for three consecutive years, negative net worth for three years, exhausted borrowing capacity, audit classification of ‘C’ or ‘D’ for three years, crushing below 50 per cent capacity for three seasons, or outstanding government dues.

 

Financially sound mills are also permitted to adopt the BOT/BOOT route under the same framework.

 

Before entering into any agreement, the factory’s board must pass a resolution and obtain prior approval under Section 20(A) of the Maharashtra Cooperative Societies Act, 1960, the order said.

 

A detailed project report (DPR) must be prepared through a government-approved agency, incorporating capital costs, operational expenses, payback period and internal rate of return.

 

For projects up to Rs 5 crore (including taxes), approvals will be provided at the level of the sugar commissioner, but those exceeding Rs 5 crore will require government-level approval.

 

Developers will be selected through a transparent and competitive e-tender process following an Expression of Interest (EoI). The selected private partner must deposit an interest-free security equivalent to one year’s lease rent.

 

Lease rent for factory land will be fixed at the prevailing ready reckoner rate or the rate determined by a government-approved valuer, whichever is higher.

 

Risk allocation and dispute resolution

 

Sources said the policy places primary responsibility for obtaining statutory approvals, environmental clearances, insurance coverage and legal compliance on the developer. Sugar factories will play a facilitative role.

 

The policy said that developers will also be solely liable for labour law compliance, employee benefits, taxes and any financial liabilities incurred during the concession period.

 

At the time of transfer, the project must be free from bank loans, unpaid wages, supplier dues and government liabilities.

 

In case of disputes, the framework provides for mutual discussion, mediation, arbitration and, if required, recourse to courts. Contracts must include an arbitration clause. Developers who abandon projects, violate contractual terms or are declared bankrupt can face termination, forfeiture of security deposits, recovery of damages and blacklisting.

 

Factories are required to submit quarterly progress reports to the government, and projects must undergo independent audits by certified chartered accountants. Regional joint directors (sugar) will conduct periodic monitoring.

 

The government has also mandated that income generated from BOT/BOOT projects be prioritised for clearing government dues, including share capital, loans and statutory payments such as Fair and Remunerative Price (FRP) obligations.

 

Officials said the policy is expected to enable cooperative sugar mills to diversify revenue streams, improve balance sheets and strengthen their capacity to meet cane payment obligations, while leveraging private capital and expertise for next-generation bio-energy and value-added projects.