Disinvestment of UP cane mills faces uncertain future

The disinvestment of Uttar Pradesh sugar mills is facing an uncertain future even as the government has yet again extended the bidding dates for these ailing units.

The units, which are located all over the state, have enormous land bank in prime locations. Most of them have been running in losses and have obsolete machinery.

Therefore, the government had decided to disinvest them to unlock their value, usher in operational efficiency in the sugar sector and cut on its losses. A total of 34 sugar units, including 11 UP Sugar Corporation and 23 federation mills, had been put on block for disinvestment. Earlier, Allahabad HC has stayed the sale of two federation units over multi-state ownership issue with Uttarakhand.

According to unofficial sources, all the 34 mills collectively could be valued at almost Rs 3,500 crore.

However, the process, which was set in motion after Mayawati came to power in May 2007, has been facing challenges on multiple fronts, including lack of interest among the private parties and litigations.

The financial bid deadline for 11 Sugar Corporation and 15 federation mills has been extended to June 3 and June 8 respectively, while the technical bid date for the remaining eight federation units is June 9.

The cane societies and directors of some of these federation mills had challenged the disinvestment process and the case is pending before the HC.

“We are hoping that the cases are settled and the process is completed before the start of the next crushing season in October 2010,” Sugar Federation MD C P Mishra said.

The HC had allowed the disinvestment of the 11 corporation mills with the rider that their land use could not be changed.

However, the industry remains apprehensive of the completion of the disinvestment process anytime soon.

“Although, some sugar companies have filed preliminary bids, none is too willing to clinch these units, as they are busy managing their own affairs in the backdrop of the cyclical nature of sugar sector,” an industry spokesperson noted.

The prospective bidders for these mills include Bajaj Hindusthan, Indian Potash, Wave Industries, Lakshmi Sugar, Dalmia Sugar, Patel Engineering, SBEC Bioenergy, Tikaula Sugar Mills, Dwarkesh Sugar Industries, Balrampur Sugar, Triveni Engineering, Rama and Oswal Groups.

As a sweetener, UP is offering industrial alcohol licence and assurance of existing cane area to individual units.