The Hindu Business Line : Bihar provides a sweet cure for sugar sector — Offers attractive incentive; plans PSU units privatisation

Agri-Biz & Commodities - Sugar
Industry & Economy - Disinvestment

Bihar provides a sweet cure for sugar sector — Offers attractive incentive; plans PSU units privatisation

Kohinoor Mandal

Private players are interested in public sector mills as these units have their own catchment area.

Kolkata , Feb. 23

The sugar industry in Bihar, after several years, is witnessing a major revival under the National Democratic Alliance Government led by Mr Nitish Kumar.

Two major changes have occurred. First, the State Government has offered an attractive incentive package for the sugar sector.

The Government is focussing on the sector's strength, as Bihar used to be a major sugar producer even in the 1970s and 1980s.

Second, the new Government is contemplating privatising some of its ailing public sector sugar units, which has been welcomed by the sugar industry leaders. In fact, many of them are trying to get first-hand information on the status and condition of these units.

Supportive role

The UPA Union Government is playing a supportive role. The Union Agriculture Minister, Mr Sharad Pawar, brought a high-profile team of sugar industrialists to Patna and held discussions with the Chief Minister on reviving Bihar's sugar industry.

At present, there are 25 State public sector sugar units, of which nine are running and the rest are closed.

The average capacity of these mills is 1,000-1,500 tonnes crushed per day (tcd), which is extremely low in today's standards.

Moreover, the units have been lying closed for several years and the machinery is not strong enough to run even for one season. Reviving these units would be possible only after scrapping the existing machinery.

Pvt sector interest

Still, private players are interested because all these units have their own catchment area. Thus, whatever price they pay for the unit actually means paying for the land and, probably, a minuscule return from the scrap.

The workers' resentment against the privatisation programme is yet to be gauged. On several occasions, Uttar Pradesh had tried to carry out a similar act but failed because it did not get the support of the trade unions.

Despite this apprehension, top officials and senior ministers of the Bihar Government are trying to prepare a list of the units, which would put on the block first.

Expansion plans

Meanwhile, a number of leading sugar companies had announced capacity expansion plans for their Bihar units. The initial attraction could be the lucrative incentive scheme. The current bull-run in the global sugar sector justifies these decisions. However, a CEO of a sugar group (which is also expanding its capacity in Bihar) and a senior official of Indian Sugar Mills Association (ISMA) said the determination of the new Bihar Government to improve matters was the most significant factor behind companies reposing their faith in the State.

"For the sugar industry to grow in that State, we need proper infrastructure, easy availability of sugar cane and a good law and order situation. We feel that the new regime will be able to deliver in these areas. This make Bihar so attractive," the CEO said.