IFCI (formerly Industrial Financial Corporation of India) has been appointed advisor for the privatisation of 33 ailing mills under the Uttar Pradesh Sugar Corporation.
Three companies, including IFCI and Ernst & Young, have submitted their Request-for-Qualification (RfQ) and Request-for-Proposal (RfP) documents.
Last year, Uflex, Gammon and the Chaddha group were in fray for buying these mills. However, the takeover bid could not materialise since the companies were not willing to pay more than Rs 600 crore against the government valuation of Rs 2,200 crore.
IFCI will recommend the best route for the privatisation of these mills, for example, whether to put individual units for divestment or club them together, so that the government gets the best price possible.
The state government wants total privatisation of the sugar sector, comprising 33 corporation and 28 cooperative sugar mills. There are already about 75 private sugar mills in the state.
The corporation mills have obsolete machinery, but are located at prime locations and have sizeable land assets. The decision to privatise them was taken in June 2007. These mills collectively carry substantial liabilities of over Rs 3,300 crore.
There are also legal hurdles in divestment of some of these mills, since they are under the purview of the Board for Industrial and Financial Reconstruction. “Such units are located in Sitapur, Barabanki, Hardoi, Bareilly and Meerut districts,” a cane department official told Business Standard.
Most of the sugar mills were acquired by the government from the private mill owners when they were sick.
“Some of the mill owners argue that since the state government had acquired the mills for being sick, the units should now revert to their original promoters, if the corporation is not able to run them,” the official added.
Besides, the land of several of these mills has been encroached upon and needs to be vacated.
Meanwhile, the government has invited bids from private firms for selecting financial advisors for the sale of 25 cooperative sugar mills. These low-capacity mills are mostly located in the rural areas. The remaining three mills are subject to court cases.
