The Hindu Business Line : Few serious bids for Orissa co-op sugar mill

THE Orissa Government's attempts to sell/lease the assets and business of the co-operative sugar mill located at Nayagarh, 80 km away from Bhubaneswar, have failed to attract any serious bids. The mill was not operational during the 2000-01 and 2001-02 seasons.

According to informed State Government sources, the last date for submission of final documents by interested bidders ended on August 31.

No serious bid has emerged till date, and informed Government sources have it that only direct negotiations with the Orissa Government may now succeed.

Of course, this means, that the offer price for the sugar mill lying closed since March 2002 may be hammered down, and whoever acquires the assets may walk way with a good bargain.

An earlier attempt by the Government to directly sell the sugar mill in October 2002 too did not yield any result, and this time around, sources point out that even appointment of experienced marketing advisers have failed to produce any response.

Sources feel that clauses in the transfer document (of assets) restricting the would-be owner from re-location of assets and/or asset stripping coupled with a high EMD (earnest money deposit) requirement of Rs 20 lakh may have been major deterrents.

An investor can utilise the assets for value-addition, but cannot sell these, and as per the agreement entered into by the State Government, employment of some 150 people has to be protected.

The plant and machinery, though requiring a thorough overhaul, is generally said to be in good health with an expected life span of another 18-20 years.

The zone, sources point out, has adequate potential to sustain a 1,250-tpd unit at 100 per cent capacity utilisation with a total cane production of 2.25-2.5 lakh tonnes for a crushing season of 140 to 150 days' gross duration.

It is learnt that the State Government had even relaxed the earnest money deposit (EMD) from Rs 20 lakh to Rs 3 lakh, and yet the interest of prospective bidders could not be sustained.

Among the bidders who had shown some interest initially before backing out were said to be well-known sugar companies such as Sakthi Sugar (already having a unit in Dhenkanal, in Orissa) and Balarampur Chini.

According to people in the know, the 1,250-tpd Nayagarh mill would have entailed substantial capital investments towards modernisation post-sale for upgradation into a 2,500 tpd unit, and emerge as a viable unit. The mill was run by Dharani Sugars of Orissa. The asset valuation was done in September 2002.

In the sugar-processing sector, the three main sub-sectors of operators are the state-owned operated mills, co-operative mills and private mills.

The demand for sugar in Orissa is said to be well in excess of supply, and with the anticipated lifting of sugar industry regulations, sugar sales are likely to result in lower closing stocks, leading to improved working capital management.

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