E&Y to advise UP govt on privatising sugar mills

The government of Uttar Pradesh has hired Ernst & Young, a professional services firm, as the advisor to carry out the privatisation of the state-owned sugar mills and distilleries.

"We have chosen Ernst & Young as the advisor to oversee the privatisation programme. The bids will be invited from August 1 and we intend to complete the exercise by September so that these mills can start crushing in the 2007-08 season, beginning October," said Kamran Rizvi, the state cane commissioner.

Earlier this month, the state government had decided to go ahead with the privatisation or sale of all the 33 mills and 4 distilleries belonging to the UP State Sugar Corporation (UPSSL) and its subsidiaries. It also plans to privatise 28 mills and 3 distilleries belonging to the UP Cooperative Sugar Factories Federation.

The combined crushing capacity of the 28 cooperative mills is 69,125 tonnes crushed daily (tcd), while that of the 33 corporation mills is 51,254.5 tcd. Each of the 7 distilleries has a capacity of 30 kilolitres a day (1 kilolitre=1,000 litres). Their combined capacity stands at 210 kilolitres a day.

The 61 factories put together produced about 13 lakh tonnes of sugar out of UP's total 85 lakh tonnes during the 2006-07 (October-September) season. They have a combined workforce of 18,000 (excluding seasonal manpower) and a negative net worth of Rs 2,000 crore.

However, industry sources are of the view that this is not the right time to carry out the privatisation of mills as the industry is in deep trouble with huge losses. As a result of this, the privatisation of mills is unlikely to fetch good prices.

"The sugar industry is faced with a difficult situation which is likely to last for another year. We are left with no cash to pay farmers as the realisation on sugar remained lower than the cane cost. The cane arrears in the state is as high as Rs 2,000 crore. Where will one find money to invest in sugar?" said an executive of a leading sugar company.