In a first-of-its-kind experiment, a cooperative sugar factory in UP has been outsourced to private sector consultancy firm Integrated Casetech Consultants for repair and maintenance as well as for operations for the 2013-14 crushing season.
The 2125 TCD capacity Powayan Cooperative Sugar Mill, in Shahjahanpur district, has been closed for the last 3 years due to the state government’s inability to run it due to huge costs and outdated technology. After deciding to run the factory through outsourcing, the UP Cooperative Sugar Factories Federation invited bids from contractors, service providers and consultancy firms to undertake various jobs of repair and maintenance and operations of the mill.
As per the letter of intent (LoI), Integrated Casetech will charge the UP government R2.25 crore for off-season repairs and maintenance of the mill, while for months the mill is in operation, it would charge R80 lakh a month.
The state government would provide the raw material in the form of sugarcane to the company, which would process it and hand over the end products such as sugar, molasses, bagasse and press mud to the state government, which would then market them on its own.
This would mean that while private hands will handle all the work associated with the mill, the ownership will remain with the Cooperative Sugar Factories Federation.
Speaking to FE, Rahul Bhatnagar, principal secretary of sugarcane in Uttar Pradesh government expressed satisfaction and said that this was a new beginning in the cooperative sector. “This will definitely usher in a new era of professionalism in the cooperative sector and we propose to shift some more of the 23 cooperative federation sugar mills to this method of running. This way they will be run more efficiently and their capacity utilisation, too, would be higher,” he said.
Powayan is one of the few cooperative federation sugar mills that has no employees as a baggage. All the former employees had taken VRS, leaving the mill clear to be given out for outsourcing.
“The factory would need repairs and we hope that would be completed in three months. We expect the mill to start crushing by December 15,” Bhatnagar added.
It may be mentioned that Integrated Casetech had also won the contract for running the lone UP Sugar Corporation mill of Mohiuddinpur on an annual contract basis a couple of months back.
And the mill is expected to start crushing on time once the sugar season starts in November. The UP government had earlier wanted to wash its hands off the ailing 27 cooperative sugar mills and had invited private players to buy them. But the matter landed in courts, forcing the government to run the mills on its own at heavy losses.
“If this experiment is successfully executed in all the cooperative federation sugar mills, it will take the load off the government's shoulders, which has to shell out around Rs 1,000 crore every year to bail out these mills from losses. Clearing their dues and spending crores on repair and maintenance is a yearly affair,” said an official.