After having kick-started its disinvestment process in the sugar sector rather ambitiously, the Uttar Pradesh government is now on the verge of calling off the whole process yet again and running the factories on its own.

?With the crushing season approaching, and an unduly long time being taken in completing the formalities, the state government has made up its mind to call off the disinvestment process this year and run the factories on its own. A formal decision to this effect will be taken in a day or two,? said an industry source.

The process, which was started in July, was the fourth attempt by the state government to hand over the loss-making sugar sector to private hands. Such was the pressure on the government to hive off units that were bleeding the state exchequer of Rs 900 crore every year, that it offered potential buyers several sops to entice them. They included distillery licences, revealing the expected sale price of mills and also making public the VRS amount payable to employees under the 6th Pay Commission recommendations so that bidders find it easy to make financial bids.

?The government was under immense pressure to settle the issue of these mills as there was very little time left for the next crushing season. But the delay in tying up the deals has left the government with no other option but to stall the process yet again,? said another industry source, requesting anonymity.

However, IFCI, which has the mandate as disinvestment advisor to the state government, is still working on the plan. It will ask interested bidders, basically national-level sugar and liquor companies, next week to submit requests for proposals soon, a source said. The UP government has two divestment plans for the sector. At one level is sugar cooperative mills running as a federation, while the other involves divesting the UP State Sugar Corporation that runs 33 mills.

Instead of selling all 33 of these mills en bloc, disinvestment of only 11 profit-making units was rolled out in the first phase. Units that were embroiled in litigation were excluded to make the offer more attractive. The government?s move paid off: ten companies evinced interest in the operational mills. These include Trevini Engineering, Indian Potash, Patel Engineering, Dwarikesh Sugar, Wave Industries, Lakshmipathy Balaji Sugar & Distilleries, DCM Shriram, PBS Food, Ticola Sugars and SBEC Bio Energy.

Of the 24 UP Sugar Cooperative Federation mills up for sale, only 15 mills received a good response while the state government is still struggling to find buyers for the remaining nine and has extended the last date for technical bids to September 10.

Of the 15 mills that have received responses, Wave Industries has evinced interest in eight mills, the Bajaj Hindustan group is interested in six, Balrampur Chini is also interested in six, the Dalmia group and Indian Potash have both expressed interest in five.

Of the Cooperative mills that have received technical bids, the expected price of Bagpat Cooperative Sugar Mills Ltd is the highest: 173.09 crore. It has a 2,500 TCD capacity. The second-highest expected price is that of Sarjoo Sahkari Chini Mills at Belrayan in district Lakhimpur Kheri. Its expected price is 152.47 crore. The unit, along with Kisan Sahkari Chini Mills Ltd at Sampurna Nagar also in Lakhimpur Kheri district, are the only units that have a 5,000 TCD capacity. ?The total expected price of all the 15 cooperative units on the block is Rs 1,421.89 crore,? said the source.

The state government also plans to divest the UP Tourism Corporation.