UP sugar mills bids opened; to be put before Cabinet

The bids for the 11 Uttar Pradesh State Sugar Corporation Limited (UPSSCL) have been opened and the matter is likely to be placed before the state cabinet this week.

The combined reserved price of all the 11 units – put on block out off total 33 UPSSCL units – is around Rs 640 crore with total capacity of over 25,000 tonnes crushed per day (TCD) of sugarcane.

While, the financial details of these bids have not been disclosed, the matter had been discussed in the core committee meeting headed by chief secretary following the opening of bids recently. Earlier, the Supreme Court had allowed the divestment of these units.

Ten companies had evinced interest, including Triveni Engineering, Indian Potash, Patel Engineering, Dwarikesh Sugar, Wave Industries, Lakshmipathy Balaji Sugar and Distilleries, DCM Shriram, PBS Food, Ticola Sugars and SBEC Bio Energy.

However, representatives of only 3 companies namely Indian Potash, Wave and PBS Food were present during the opening of bids.

“We are confident the divestment process of these sugar mills would be completed before the start of the next crushing season,” a highly placed state government official told Business Standard on condition of anonymity.

The mills are Amroha in JP Nagar; Bijnore, in Bijnore district; Bulandshahr; Chandpur, in Bijnore; Jarwal Road in Bahraich; Khadda in Kushi Nagar; Mohiuddinpur in Meerut; Rohanakalan in Muzzafarnagar; Saharanpur; Sakhotitanda in Meerut; and Siswabazar in Maharajganj.

“Since, these mills are in running condition and that the government is encouraging the millers for integrated operation comprising co-generation and ethanol production, apart from sugar, some of these companies would want to own them,” an industry watcher noted.

He further said the state government might resort to Swiss Challenge Method (SCM) to facilitate optimum price discovery of these assets.

In case, the highest financial bid is below the expected price, but above 50 per cent of the expected price, the UPSSCL may invoke SCM. This would allow other parties to match the highest bid. The original highest bidder shall have the right of first refusal to match the highest bid in the subsequent fresh bidding process.

Although running in looses, these 11 units have enormous land bank in prime locations.

A total of 34 sugar units, including 11 UPSSCL 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. The reserved price of all these 34 mills is over Rs 2,000 crore. The bidding process of the federation is also likely to be taken up later this week.