Bitter Sugar

Mayawati government is in the dock after allegations of corruption in the sale of four sugar mills
Pradeep Kapoor Lucknow

The sale of four sugar mills of the UP State Sugar Corporation by the Mayawati government has opened a can of worms, with the Congress approaching the UP Lokayukta demanding a probe into corruption in the deals involving thousands of crores of rupees. The mills have allegedly been sold at 10 per cent the market value, far less than what could be retrieved if they were sold as scrap. 

Digvijay Singh, the AICC general secretary, led the delegation of senior party leaders that met the Lokayukta.

UPCC President Rita Bahuguna said the state government is in the process of selling more mills and that the sale is not in the interest of farmers as private mills would then monopolise the industry and exploit them. This would force farmers to turn away from sugarcane to other crops, plunging the nation into a sugar crisis, more so since countries like Brazil are reducing sugar production by shifting to manufacturing ethanol.

Moreover, two of the mills have apparently been sold to two handpicked buyers - Waves Ltd and PVS Foods Ltd. Both companies belong to the same business group, owned by liquor baron Ponty Chadha, allegedly close to those who matter in the state government. Earlier in 2009, Chadha had been handed over the reins of the wholesale liquor business in UP as well as control of retail vendors in several districts.

The complaint submitted to the Lokayukta gives details of the gross undervaluation of the mills' assets. For valuation, the government relied upon figures given by the valuers that reflected 'discounted cash flow' technique and net saleable assets like land and buildings. Other assets, stocks of sugar and molasses, etc worth hundreds of crores have not been taken into consideration. In fact, cost of land value has been taken as '0'.

The Amroha mill,  sold for Rs 17.01 crore to Waves Ltd, is said to be worth more than Rs 250 crore. Spread over 29.89 hectares in the heart of the town, where the market rate is Rs 3,000 per square metre, the mills' assets include four huge bungalows, guest house, residence of the district judge and the circuit house, besides six colonies having 300 residential quarters and 20 senior officers' quarters in JP Nagar district, godowns, machinery, etc. It is learnt that Chadha's representatives came in a motorcade of 40 vehicles, with private security guards and state police officials, to take control of the mill. 

Similarly, the mill in Chandpur (Bijnor district), set up in 1978 and spread over 84 acres in an area rich in sugarcane production, was sold at Rs 90 crore to PVS Foods Ltd. Its assets are estimated to be worth more than Rs 2,000 crore. The mill had been yielding profits since its inception till 2005. But since the last few years, it has been made to shut production early every year and its cane diverted to a privately-owned mill. Despite this, it made profits again in the years 2008-09 and 2009-10.

Another mill at Jarwal Road (Bahraich district) was sold to Indian Potash Ltd for Rs 26.95 crore. This mill was modernised, expanded and renovated at a huge cost in the early 1990s and made a profit of over Rs 15 crore last year. The same company has also bought another mill at Siswa Bazar (Gorakhpur district) for Rs 34 crore. This is the very amount that had been spent earlier on its renovation. The mill had made a profit of about Rs 30 crores last year.

More sugar mills of the UP Sugar Corporation are up for sale. These are in Bijnor, Bulandshahr, Khadda, Saharanpur and Sakauli Tanda.

Besides the undervaluation that suits the buyers, the fact that the mills sold are those that have been modernised and expanded, lends credence to the allegation of a nexus between the state government and the handpicked buyers. 

Moreover, government loans to the mills have been converted into equity so that the buyers don't have any liability to pay back the debt.

As the mills have been sold at a throwaway price, the Congress has pointed out that 50,000 farmers of Amroha could have given Rs 4,000 each and the government would have got Rs 20 crore for the sugar mill instead of Rs 17 crore that was paid by Waves Ltd.

This story is from the print issue of Hardnews: SEPTEMBER 2010