Mumbai: In the heart of Maharashtra’s sugar belt in Ahmednagar district lies Pravaranagar. This is where the state’s co-operative sector movement began. Congressman Vithalrao Vikhe Patil set up the Pravara co-operative sugar factory in 1950. His son Balasaheb Vikhe Patil, a seven-time member of Parliament (MP) and a minister in both the state as well as central governments, expanded the co-operative model across agriculture, dairy and agro-based products, schools and colleges, and medical and professional institutes. Maharashtra got its template of the co-operative-led political economy on which rested Congress politics for decades.
Balasaheb Vikhe Patil quit the Congress twice but cherished the party’s co-operative link till he died three years ago. His son Radhakrishna Vikhe Patil was a Congress MLA and leader of the Opposition in the state assembly in 2014-19. In June this year, he switched loyalties to the Bharatiya Janata Party (BJP) and is now a minister in the Devendra Fadnavis government. His son, Sujay Vikhe Patil, is the BJP’s Lok Sabha MP. After 60 years and four generations later, the Pravaranagar cooperatives are finally in the BJP’s complete control.
As the party entrenches itself in Maharashtra’s cooperative sector, an issue hanging fire for years has proved useful. The financial mismanagement in Maharashtra State Co-operative Bank Ltd (MSC Bank)—the apex bank of 31 district co-operative banks—during the previous Congress-Nationalist Congress Party (NCP) government was known. The BJP is now trying to use this to drag down powerful co-operative czars, including Sharad Pawar.
Punjab and Maharashtra Co-operative Bank Ltd (PMC) in Mumbai was placed under restriction this week. In the past two years alone, five other urban co-operative banks in Maharashtra have been placed under restrictions by RBI citing financial irregularities. These include Kapol Co-operative Bank Ltd, City Co-operative Bank Ltd, Karad Janata Sahakari Bank Ltd, Shivam Sahakari Bank Ltd, and Youth Development Co-operative Bank Ltd. Of course, the urban co-operative banks problem falls in RBI’s domain.
Put together, these developments signify a tectonic shift in the sector—old certitudes are falling apart, new power equations are emerging. Power and clout in rural co-operatives have moved away from the Congress-NCP towards the BJP. The Enforcement Directorate (ED) filing money laundering cases against the Pawars and 70 directors of MSC Bank is a clear signal that the BJP is willing to hunt big. And the crumbling structure of some urban co-operative banks so far considered safe reveals the rot within.
Since the 1950-60s, co-operative czars—or sugar barons as they were called—perfected the model of wielding political power through farm co-operatives and district co-operative banks. Yashwantrao Chavan, Vasantdada Patil and, to a lesser extent, Shankarrao Chavan—all powerful chief ministers, both the Chavans were in the Union cabinets—were stalwarts of the co-operative political economy. The Marathas dominated the sector. In the past three decades, Pawar became its symbol.
In the past decade, the co-operative sector turned into a shadow boxing arena between the Congress-NCP and an ambitious BJP keen to deepen its footprint in rural Maharashtra. Control of the co-operative framework meant consolidation of political, economic and social power. Directors and chairpersons of co-operatives became contestants in state and national elections. Hundreds of thousands of co-operatives in sugar factories, spinning mills, agro-based products, credit societies and banks translated into enormous clout.
Cutting the Congress-NCP’s cord with the co-operative sector, the BJP reckoned, would be an effective way to expand its influence. A few BJP leaders like Nitin Gadkari adopted the co-operative model and set up their units. But complete domination would require challenging, dismantling or occupying the old framework, which has the Congress’s imprint. The BJP, under Prime Minister Narendra Modi and party president Amit Shah, is known to play for big stakes.
In battle mode between 2009 and 2014, it raised questions in the assembly about the rot in the sector, the mismanagement of the co-operatives and the large-scale sinking of public money into ailing co-operatives—all legitimate issues. In power since 2014, it has contested elections to co-operative bodies and won many of them. Lately, it has wooed leaders like Radhakrishna Vikhe Patil and moved the might of the investigating agencies against the others.
The ED case against Pawar, his nephew and former deputy chief minister Ajit Pawar, and 71 directors under the Prevention of Money Laundering Act for embezzling funds from MSC Bank allegedly to the tune of ₹25,000 crore must be read against the backdrop of the banking rot.
To be sure, MSC Bank has a lot to answer for: money was lent to sugar co-operative factories and spinning mills without adequate collaterals; units with weak financials or negative net worth were given loans; it sanctioned loans to factories whose promoters were connected with the bank; directors drove down the price of a co-operative by posting repeated losses and then used the bank’s loans to buy cheap. Moreover, directors of the bank or loss-making co-operatives that received state government doles happened to be powerful MLAs or ministers in the state cabinet. A classic case of one hand giveth, the other taketh.
THE CASE AGAINST PAWAR
In its case, the ED claims “the mismanagement was not inadvertent but pre-planned and schemed as the persons in the state government were under the implicit direction of Sharad Pawar who was holding the reins of all the pillars of the co-operative sector". This accusation—vague, undefined—may not stand legal scrutiny, people close to the matter said. The case is based on a first information report (FIR) filed by the Mumbai Police under instruction from the Bombay high court. The FIR does not mention him.
Pawar’s legal advisors have told him that the enforcement case information report cannot go beyond the scope of the police FIR, and naming him and the others who are not in the FIR is, therefore, a legal lacuna, according to people close to the matter. There may be grounds for a criminal case, but not against Pawar because he was neither a director on the MSC Bank board nor involved in its day-to-day operations, the people added.
Ensnaring Pawar in the case at a time when an election campaign is in full swing for polling on 21 October is a political move. The ED action was timed to send him and the Congress-NCP alliance into a tizzy, and distract him from election management. Chief minister Devendra Fadnavis strenuously denied that there was politics behind the ED action.
“What matters is public perception, especially in an election campaign. Accusations stick," said Pratap Asbe, a political analyst who has closely tracked Pawar over the decades. Pawar’s pocket borough of Baramati shut down for a day in a show of support. Pawar invoked Maratha pride to say that “in Maharashtra, we follow the principles of Chhatrapati Shivaji; we won’t bow down before the Delhi throne". The signals were clear, the battle lines were drawn. His bonhomie with Modi and their guru-shishya relationship seem distant now.
The first to offer support to the BJP to form government in Maharashtra in October 2014, Pawar spent the better part of the last month battling the BJP on the ground. In his 80th year, in spite of ailments, he toured several districts of Maharashtra after many from the NCP joined the BJP. The sub-surface tensions between the different branches of his family, now with third-generation political aspirants, have also reared up. That the Congress, with which he stitched up an alliance, is listless and rudderless does not help.
Young people have thronged his rallies. Satara, an important pit stop in the sugar belt of western Maharashtra, saw a virtual shut down last weekend for his rally, in which youngsters screamed: “Ala re ala kon ala, Modi-Shah cha baap ala (Look who has come, Modi-Shah’s dad has come)". In a Solapur rally, Pawar took on Union home minister Amit Shah with unusual belligerence. To Shah’s earlier query about what Pawar had done for five decades, he retorted, “I don’t need to give anyone an account of my work of 50 years. At least I’ve not been sent to jail…", with reference to Shah’s jail term in 2010.
BUNGLE IN CO-OP JUNGLE
The MSC Bank, under administrator’s rule since May 2011, has seen a series of investigations in the past eight years—a National Bank for Agriculture and Rural Development report, state government inquiries, and a private complaint. Its directors, including Ajit Pawar, were indicted in these. The modus operandi was to disburse loans from district co-operative banks to sugar mills with negative worth or misuse loans for non-stated purposes. When bad loans piled up and the value of a co-operative sugar factory or mill declined, politicians bought them. In 2013, activists Anna Hazare and Medha Patkar pointed out 26 such cases, together worth nearly ₹10,000 crore.
The political nexus is unmissable. Research reports show nearly 56% of the co-operatives had chairmen who had contested or won parliamentary or assembly elections between 1993 and 2005. Controlling sugar co-operatives helped politicians rise in the party and governmental hierarchy, which in turn got them nominated to the boards of other co-operatives, especially banks. Thus, a “two-way" relationship meant the sugar industry was and is a huge contributor to election funds.
However, ordinary members of co-operatives tend to be poor to middle-income farmers. They became a captive vote bank for the politician-co-operative chiefs. “The socially-economically-politically powerful lording over co-operatives were not merely Marathas but actually a Maratha elite, whose dominance was near complete," political scientist Suhas Palshikar pointed out. Sections of the Maratha elite have hopped across to the BJP now. The post-liberalization and social engineering era saw the Maratha hegemony break, the community disconnected from its elite leadership and beginning to assert itself by voting across parties. This coincided with the BJP’s rise.
“The post-liberalization years saw co-operatives move towards privatization, which yielded handsome profits. They began to place this in financial markets, even violating RBI guidelines," said Vishwas Utagi, a Mumbai-based banking sector analyst and unionist. “When the markets collapsed during the Ketan Parekh scam, co-operative banks got bailed out if they had a powerful politician backing them. We know the Madhavpura Mercantile Co-operative Bank case," he added.
In 2014, the newly-minted Fadnavis government’s early decision was to amend the Maharashtra Co-operative Societies Act, 1960, to appoint independent experts to the boards of all co-operatives, including banks and sugar units. It allowed the party better access to the co-operative units. Two years later, the government rolled back the caps on surplus molasses, leading to massive gains for the co-operative sugar factories. The co-operative sugar lobby pushed for higher use of ethanol in fuel, from 5% to 10%, with Gadkari as one of its biggest advocates.
Pawar’s tenure as Union agriculture minister in 2004-14 saw the sugar industry—by extension, the sugar co-operatives in Maharashtra—being bailed out with special packages. This meant some of the unpleasant stuff on the books of co-operative units and banks was papered over. The BJP is now using aggressive treatment to fix both the ailing units and Congress-NCP leaders. The unstated purpose is to weaken the Pawars. But the rot may not remain limited to one family or party. In the PMC case, it has emerged that BJP MLA Sardar Tara Singh’s son Rajneet was on the board of directors for 13 years. The case was filed, incidentally, by former BJP MP Kirit Somaiya.
Ironically, the roots of Pawar’s predicament today are in his old rivalry with the Congress in general and former chief minister Prithviraj Chavan in particular. Chavan had initiated action in 2011 to lay bare the rot in MSC Bank in order to stymie the NCP and Pawar. In the fire that’s now raging, the Congress, too, has been affected. The BJP may be on the ascendant, as it cleanses the system, but the PMC case shows the chinks in its armour too.
Smruti Koppikar, a Mumbai-based journalist and chronicler, writes on politics, cities, gender and media.