With CBI on prowl, Wave Group, Indian Potash offer to return UP sugar mills

The two firms had bought five units each when 21 UP sugar mills were put on block under Mayawati's regime

Even as the Central Bureau of Investigation (CBI) has taken over the probe into the sale of Uttar Pradesh government sector sugar mills sold during the previous Mayawati regime (2007-12), the Wave Group and Indian Potash Limited (IPL) have now offered to return the units.

The two companies had bought five units each when 21 UP sugar mills were put on block between July 2010 and March 2011. The remaining units were taken over by other entities. While Wave Group was promoted by late liquor baron Ponty Chadha, IPL is a public sector undertaking.

Highly-placed sources told Business Standard in Lucknow, that Wave and IPL have written to the state government offering to return two loss-making units each. However, the Yogi Adityanath government has not taken any call on the issue, since the sale process was already under the scanner and a recommendation for the CBI probe was still pending then.

Interesting the letters were written about 15 days back and before the central agency took over the probe. “Probably the two companies anticipated that the CBI would eventually take over the investigation and they now desire to come clean in perceptible sticky deal,” a senior official quipped on anonymity.

Within a month of coming to power on March 19, 2017, Adityanath had instituted an inquiry into the alleged loss to exchequer to the tune of about Rs 12 billion in the sale of 21 sugar mills during the Mayawati regime on account of discrepancies in valuation of land and machinery. He had also underlined his government would recommend for a CBI probe if need be.

The successive Akhilesh Yadav government (2012-17) had also ordered a probe by the state Lokayukta in November 2012. However, no action was taken in the matter.

In 2007, the Mayawati dispensation had decided to privatise 10 running mills of UP State Sugar Corporation Limited (UPSSCL) and 11 defunct units of UP Rajya Chini Evam Ganna Vikas Nigam Ltd (UPRCEGVNL). The 21 mills were later disposed of during 2010-11.

Later, Comptroller and Auditor General (CAG) had pointed to grave anomalies in the sale process with regards to undervaluation of land and plant machinery, besides lack of competitive bidding. It was alleged the sale proceeds were much lower than expected in 14 of the 21 mills sold during the process.

Meanwhile, retired bureaucrat Atul Kumar Gupta, who was the chief secretary when the sale had taken place, said the sale decision was taken to save public exchequer from recurring losses with the condition of continuing to run them as sugar manufacturing units in compliance with the High Court order.

He claimed the state had in fact saved over Rs 89 billion during 9 years since the sale. “CAG had assessed loss of Rs 11.8 billion based on asset valuation methodology (AVM), which is only relevant for sale under liquidation. Sale of operating mills fetched Rs 4.5 billion against a valuation of Rs 3.77 billion, if valued by Discounted Cash Flow (DCF) methodology, the correct method for running units,” he noted.