UP to outsource Meerut sugar mill to private players, retain ownership

Written by Deepa Jainani | Lucknow | Updated: Jun 1 2013, 05:43am hrs
In what can be called the first experiment of its kind in the sugar sector in the state, the Uttar Pradesh government has decided to hand over the running of the lone UP Sugar Corporation mill at Mohiuddinpur in Meerut to experienced hands in the private sector.

The government has invited tenders from reputed contractors/service providers and consultancy firms to undertake various jobs of repair and maintenance and operation of the 2500 TCD sugar mill in Mohiuddinpur, a unit of UP State Sugar Corporation, for the crushing season 2013-14.

The Mohiuddinpur unit is the only sugar mill that managed to buck the wave of disinvestment when 10 other sugar mills were sold off for a song to private buyers in 2010 by the Mayawati government. In fact, the sale of the sugar mills saw a lot of controversy and the Lokayukta is presently conducting a probe into it.

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In fact, the Mohiuddinpur unit was not sold off since it got embroiled in various legal issues as a result of which it has been closed for the last three years. In the meantime, all the employees of the sugar mill were given VRS. After the Samajwadi Party came to power, the UP Sugar Corporation tried to restart the mill, but realising that the task was a tough one, especially as the corporation had hived off all its assets and did not have any trained manpower or new technology to run it, it thought it best to outsource the mill to experts.

According to a state government official in the know, even after the factory is outsourced to private hands, the UP government will continue to have ownership in it. Whosoever will run the mill will do so on a payment and the sugar factory will still be in the state governments ownership. The government will make sugarcane available for crushing to the private party, which will crush it and hand over the various end-products, be it sugar, molasses, bagasse or press mud, back to the government, he said, adding that this is the first time the state is attempting to do such a thing.

It may be mentioned that the idea of hiring technical consultants for running sugar mills is a relatively new thing in India and, so far, only one sugar mill at Panipat in Haryana has tried outsourcing the operation and management of its sugar mill, along with its power cogeneration, to a private consultant. Thanks to efficient technology, the mill has posted a record recovery rate of 9.8% this year, up from the 7.8% when it was handed over to the consultant three years back.

What is interesting is that while the government would still remain the owner of the mill, it would also be able to encash the idea politically by scoring brownie points for getting a closed sugar mill operational and still not losing out on ownership. This is a test case. If this experiment clicks, the state government can look forward to handing over the operation and maintenance of its 27 cooperative mills to private consultants too. It would take the load off the government's shoulders, which has to shell out around R500 crore every year to bail out these mills from losses," said the official. The UP Co-operative Sugar Factories Federation has a total of 27 functional sugar factories, with a total crushing capacity of 66,625 TCD.

Initially, the Mayawati government had tried selling off the Mohiuddinpur factory along with 10 other operational factories of the Uttar Pradesh State Sugar Corporation. But while the other 10 factories found private buyers in 2010 and are now being run by their new owners, the only mill that could not be sold off in running condition was the Mohiuddinpur unit. The government later even tried selling it off through the Swiss Challenge Method, but that too did not succeed. The idea was dropped and, since then, the factory has remained closed for three seasons. Since the entire process of selling the factories had run into a lot of controversy during the previous regime, the SP government decided to keep it and have it run in the next season by private consultants who can bring in new technology and experienced hands, said an

official on the condition of anonymity.