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A sugar mill

Harish Damodaran

New Delhi, Aug. 8 In a setback of sorts to the Uttar Pradesh (UP) Government’s plans to privatise all its State-owned and cooperative sugar mills, the Allahabad High Court has ordered an interim stay of the entire sale process.

“The Court has asked the administration not to proceed with the privatisation/sale process till the next date of hearing, fixed for August 24. This is in response to the petition filed by two cooperative mills, Nanauta and Sarsawa (both in Saharanpur), challenging the sale of governmental equity without seeking approval from other shareholders,” said a highly placed State Government official.

Ms Mayawati’s Government had early last month announced privatisation of all the 33 mills and four distilleries owned by it. In addition, 28 mills and three distilleries under cooperatives were put on the block. The State Government had subsequently also appointed Ernst & Young as advisor for the sale process, while setting end-September as the target date for legal transfer of the assets of the mills, to coincide with the start of the 2007-08 crushing season. But with the High Court issuing its stay on Wednesday, the deadline could well be missed.

“We have questioned the Government’s right to privatise cooperative mills without seeking approval of other shareholders. In a cooperative, every shareholder has only one vote, unlike the one share-one vote principle followed in companies. So, even if the Government owns 90 per cent of a cooperative’s equity, it has to convene the general body and get an appropriate voice resolution passed,” according to Mr V.M. Singh, a prominent farm leader spearheading the petitioners’ cause.

The UP Government is now proposing to amend its Cooperative Societies Act, 1965, so as to empower the Registrar of Cooperative Societies (RCS) to deregister and liquidate the societies controlling the mills. Once that happens, the mill assets can be disposed to the prospective buyers.

Mr Singh claimed that liquidation will not be easy, given that out of the 28 cooperatives, only five are chronically loss-making, while the remaining 23 have reported profits in at least one of the last three seasons. “You liquidate only when no possibility of turnaround exists. And in today’s situation, there is no sugar company even in the private sector that is making profits. In UP, only two factories have made 100 per cent cane price payments and both (Ramala in Baghpat and Najibabad in Bijnor) are cooperatives,” he added.

More Stories on : Sugar | Courts/Legal Issues | PSU | Agricultural Policy | Disinvestment

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