UP sugar mills on privatisation track

Big players of sugar industry,including DCM,Triveni and Dwarikesh,are in the fray and we are confident that the 11 mills will be disposed ahead of the next cane crushing season,beginning November, said an official of the Cane Department.

After the evaluation of technical bids,the financial bids will be opened next month.

This has become possible as a result of several policy changes that have been made in the past one year.

The Mayawati government had decided to sell off all 61 sugar mills immediately after it was voted to power in May 2007. The privatisation was then scheduled to be completed by September 2007,ahead of the commencement of the cane crushing season,but the appointment of consultants,valuers and legal advisers took almost a year.

For 33 mills in the public sector UP State Sugar Corporation Limited,the government adopted the route of strategic sale of equity.

The bids were invited in May 2008,but the response was very poor,because most of these mills have low crushing capacity,worn-out plant and machinery,and huge accumulated losses.

As many as 27 of these mills had been acquired by the government over 40 years ago as sick mills from private owners. Most of these had been set up during the British days. Only nine of these mills have a daily crushing capacity of 2,500 tonne cane daily while the rest are between 1,000 to 1,200 TCD,which makes them economically unviable.

The government then changed its strategy. It identified 11 of the best mills and adopted the route of ‘slump sale’,offering concessions and incentives to buyers. Under this policy,the reserve price has been drastically reduced.

Earlier,the government had written off the accumulated losses,offered to bear the burden of financing the VRS of the employees,and agreed to allow change of land use to mills which are either within the municipal limits or on the outskirts,thereby permitting the investor to use the mill land as real estate.

The response of bidders this time is the result of these

policy changes.

But 22 mills still remain. The government believes it has better chances if these mills are offered for sale individually. For this,these mills will first have to be made separate entities by demerging them from the UP State Sugar Corporation.

For this,the government will have to approach the Company Law Board and the entire process may take five to six months,said an official of the department.

The process of disinvestment of the 28 cooperative sector sugar mills is a different story.

Some of the cooperative societies managing the mills challenged the government’s move in the Allahabad High Court. After over a year-long legal battle,the high court stayed the privatisation of four mills. In October 2008,the government cancelled the process of disinvestment because the crushing season had begun.

The process began afresh in January this year and,to begin with,IFCI was chosen as the advisor for both the public sector and cooperative sector mills.