Highly-placed sources in the Uttar Pradesh government, when contacted, confirmed that the dairy development minister of the state, Jaipal Singh had recently backtracked on the decision to hand over the plant to Amul ostensibly on the ground that if it reneged on its commitment to pay the market price for milk to unions, it could well fuel severe law and order problems in the western UP region from where most of the milk for the plant would be procured.

It may be recalled that the UP government had initiated the project for setting up a fully automated dairy plant in Noida with the aim of pasteurising, packaging and selling milk within UP as well as neighbouring states almost six years ago. Set up with aninvestment of Rs 48.5 crore, the Noida plant was commissioned over five years ago but is yet to become operational since successive state governments dragged their feet over the issue fearing heavy operational losses in the initial stages.

In view of this, the Kalyan Singh government decided to disinvest in the project to recover the expenditure incurred by the UP government. In a bid to widen its operational base and sensing a good business proposition, NDDB had persuaded Amul to purchase the unit. Recently, Amul officials had even thrashed out an agreement with the Pradeshik Cooperative Dairy Federation (PCDF) of UP for acquiring the Noida project. Sources in the UP government disclosed that as per the agreement, Amul had not only agreed to pay all liabilities accruing to the UP government as well as reimburse the government for the money spent but had also agreed to abide by the commitment made by the UP government to the milk unions.

Following this, the Kalyan Singh government had accorded itsclearance for the disinvestment of the project earlier this year. However, in a Cabinet meeting held in Lucknow in March, the UP Dairy Development Minister decided to do a volte face on the government's decision on the grounds that he envisaged trouble in case Amul did not pay market rates to the milk unions.

Given the tenuous hold that the UP CM has over ministers in his Cabinet, the UP government has decided to defer a final decision on the fate of the project despite the fact that the Amul offer is the best offer that it has received for the project, sources said.

It is also feared that the decision not to sell the Noida plant to Amul may also affect the Gujarat milk cooperative's long term plans for UP which include setting up ice cream units in Lucknow and Noida and a powdered milk and cattle feeding unit in Kanpur.