important notice - bihindustries.bih.nic.in/acts/ad-01-24-10-2007.pdf · sugar undertakings...

Private &Confidential Viability Report

Bihar State Sugar Corporation Ltd. 1

IMPORTANT NOTICE

This Report contains proprietary and confidential information regarding to Bihar State Sugar

Corporation Ltd (BSSC)’ or ‘the Corporation’).This has been prepared by SBI Capital Markets

Ltd. (‘SBICAP’) on the basis of information provided by the corporation, technical consultants,

valuers, legal advisor and publicly available sources, to be used for the purpose of providing

Advisory Services to the Corporation or Sugarcane Industries Department, Government of Bihar

for exploring the possibility of revival of the closed sugar units of the Corporation..

This report is based on information made available by BSSC. No assurance can be provided that

the assumptions or data upon which these recommendations have been based are accurate or

whether this business plan will actually materialize.

Neither SBICAP, nor State Bank of India or any of its associates, nor any of their respective

directors, employees or advisors make any expressed or implied representation or warranty and

no responsibility or liability is accepted by any of them with respect to the accuracy, completeness

or reasonableness of the facts, opinions, estimates, forecasts, projections, or other information set

forth in this Report or the underlying assumptions on which they are based .There is no

assurance on the success of the assignment and it is solely based on the judgment of the investors

and the current market conditions.

This Report is furnished strictly on confidential basis. Neither this Report, nor the information

contained herein, may be reproduced or passed to any person or used for any purpose other than

stated above. By accepting a copy of this Report, the recipient accepts the terms of this Notice,

which forms an integral part of this Report.



TABLE OF CONTENTS

SECTION I ..................................................................................................................................... 4

1. INTRODUCTION............................................................................................................ 5

2. BACKGROUND .............................................................................................................. 6

3. APPROACH AND METHODOLOGY ADOPTED .................................................. 10

SECTION – II............................................................................................................................... 12

4. THE SUGAR INDUSTRY............................................................................................. 13

4.1 Nature of Industry and Current Trend ...................................................................... 13

4.2 Possible business models for a sugar company ........................................................ 14

4.3 Revival of Mandatory Ethanol-Blending Programme ............................................. 14

4.4 Status of sugarcane based industry in Bihar Vs. other states.................................. 15

4.4.1 Area under cultivation in State of Bihar ................................................................ 17

4.4.2 Annual production of sugar in State of Bihar ....................................................... 17

4.4.3 Yield of sugarcane production in State of Bihar ................................................... 18

4.4.4 Sugarcane crushed in State of Bihar ....................................................................... 19

4.4.5 Duration of crushing season in State of Bihar....................................................... 19

4.4.6 Recovery Rate in State of Bihar ............................................................................... 20

4.5 STUDY OF EXISTING SCENARIO IN STATE OF BIHAR ..................................... 21

4.6 Conclusion...................................................................................................................... 23

5 SUGAR UNITS-LOCATIONAL MAP.............................................................................. 24

SECTION III ................................................................................................................................ 25

6 SCOPE OF WORK............................................................................................................... 26

7 APPROPRIATE TRANSFER MODEL.............................................................................. 31

7.1 Mode of Transfer ........................................................................................................... 31

7.2 Rationale of Leasing Model.......................................................................................... 32

7.3 Lease Period for Land ................................................................................................... 32

8 VALUATION & FAIR VALUE ......................................................................................... 35



8.1 Valuation ........................................................................................................................ 35

8.2 Fair Value........................................................................................................................ 35

9 SETTLEMENT PROCESS, SACRIFICE & UTILISATION OF THE PROCEEDS ....... 37

9.1 Settlement process ......................................................................................................... 37

9.2 Sacrifices ......................................................................................................................... 37

9.3 Utilisation ....................................................................................................................... 40

10 LITIGATIONS AND SETTLEMENTS ........................................................................ 42

10.1 Litigations................................................................................................................... 42

11 SUGGESTED PLAN OF ACTION .............................................................................. 44

12 TENDERING/BIDDING PROCESS ........................................................................... 45

13 SELECTION CRITERIA................................................................................................ 46

14 TRANSFER PROCESS .................................................................................................. 49

15 SUGGESTIONS FOR ADDITIONAL INCENTIVES FOR INCLUSION IN SUGAR

POLICY ........................................................................................................................................ 51

16 RECOMMENDATIONS ............................................................................................... 53



Section I

GGGeeennneeerrraaalll



1. Introduction

Bihar State Sugar Corporation Ltd. (a Government of Bihar Undertaking) was

incorporated in 1974 to manage, operate and control the loss making sugar and

distillery units under the control of State Government. The Government of Bihar

(GoB) under the Bihar Sugar Undertakings (Acquisition) Ordinance 1976 and

Sugar Undertakings (Acquisition) Act 1985 acquired 15 sick Sugar Mills and 2

distilleries from private companies/owners between 1977-1985. The said

takeover of the sick units was undertaken with an objective to revive them and

make them operational and viable.

Most of the units could not sustain the mounting pressure of declining prices and

increasing input costs and thereby the units started closing down one after

another. The units thereafter could not be revived and all the units were closed

by the crushing season 1996-97.

The machineries have not been refurbished since the closure. Due to the same,

the conditions of the units are presently not satisfactory.

The Government of Bihar, constituted a high level committee under the

chairmanship of Cane Development Commissioner in February 2006. The

Committee was of the opinion that a financial advisor shall be appointed for

valuation of the units and to suggest appropriate revival plan for the closed

sugar units of BSSC.



With a view to finalise the policy for making these units operational, GoB, finally

invited bids for Advisory Services to suggest the Methodology and Approach for

Revival/Restructuring/Sale/Lease of the closed sugar units of Bihar State Sugar

Corporation Limited.

Accordingly, SBI Capital Markets Limited was appointed to advise the

Government in adopting appropriate strategy subject to the approval of the State

Government. SBICAP will also assist the Government in preparing the Bid

Documents for inviting expression of interest, preparing Request for

Qualification and Request for participation etc as is necessary to attract investor

for revival/lease/sale of sugar units based on various parameters.

2. Background

Incorporated in 1974 under the companies Act 1956, the Bihar State Sugar

Corporation Limited (BSSC) was formed to acquire and manage sugar units of

Government of Bihar. The units were facing problems in satisfying their cane

growers dues, labour dues as also the statutory dues. Considering the same, the

Government of Bihar under the Bihar Sugar Undertakings (Acquisition)

Ordinance 1976 and Bihar Sugar Undertakings (Acquisition) Act 1985 acquired

various units under the aforesaid provisions. Since then the units were managed

under the BSSC.

The financial statement of BSSC was internally audited in FY 2001-02. The

Balance Sheet as on March 31, 2002 is as under:



Rs. Crores

PARTICULARS 2006 Rs. SOURCES OF FUND: SHAREHOLDERS FUND: Shareholders Fund H.O 20.00 Reserve & Surplus H.O 0.00 Unit 9.24 LOAN FUND Secured Loan H.O 0.00 Unit 8.42 Unsecured Loan H.O 692.57 Unit 13.30

TOTAL : Rs. 743.53 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block H.O 0.16 Unit 32.09 Less : Depreciation H.O 0.12 Unit 19.39 Net Block 12.74 Capital Work in Progress 1.19 Investments H.O 0.00 Unit 0.20 Current Asset , Loans & Advances Inventories H.O 0.00 Unit 13.13 Sundry Debtors H.O 0.00 Unit 1.61 Cash & Bank Balance H.O 0.23 Unit 1.47 Loans & Advances H.O 306.64 Unit 54.40

TOTAL : (A) 377.48 Less : Current Liabilities & Provisions H.O 3.28 Liabilities Unit 455.60

TOTAL : (B) 458.88 NET CURRENT ASSETS : (A-B) (81.40)

Suspense Account (Head Office) 0.10 Suspense Account (Goraul Office) 0.08



The details of the unsecured loans are as follows:

Rs. Crores

Particulars Amount Loan from Government of Bihar against Share capital 0.35 Loan from Government of Bihar 288.19 Interest accrued & due on above Loan 395.21 Penal interest accrued on Government Loan 8.79 Evolving fund for Cane Development 0.03 Total 692.57

BSSC is not operating and is functionally defunct. The liabilities of the

corporation to Government of Bihar are in the form of unsecured loan. The

details of the various units are as under:

Sl No

Unit Name Name of the Previous Owner

Date Of

Establishment

Capacity (tcd)

Acquisition by Government of

Bihar

Date of Closure

1. Samastipur Samastipur Sugar Central Sugar Limited

1920-21 808 1977 1997-98

2. Ryam Tirhut Co-operative Sugar Co. Limited

1914-15 925 1977 1994-95

3. Goraul Sheetal Sugar Works Limited

1932-33 800 1977 1994-95

4. Siwan S.K.G. Sugar Limited

1932-33 1000 1985 1993-94

5. Guraru Guraru Chini Mill Limited

1932-33 850 1979 1991-92

6. New Siwan New Siwan Sugar & Gur Refining Company

1918-19 935 1979 1991-92

7. Lohat Darbhanga Sugar Co. Limited

1914-15 1320 1977 1997-98

8. Bihta South Bihar Sugar Mills Limited

1932-33 1240 1977 1991-92

9. Sugauli Sugauli Sugar Works Limited

1933-34 900 1985 1997-98

10. Hathua S.K.G. Sugar Limited

1933-34 1728 1985 1997-98

11. Lauria S.K.G. Sugar Limited

1905-06 1626 1985 1997-98

12. Motipur Motipur Sugar Factory

1933-34 1219 1985 1997-98



13. Sakri Darbhanga Sugar Co. Ltd.

1933-34 782 1977 1997-98

14. Banmankhi Purnea Co-operative Sugar Factory Limited

1970-71 1000 1977 1997-98

15. Warisaliganj Warisaliganj Co-operative Sugar Mills

1933-34 700 1977 1993-94

16. Hathua-Distlillery

S.K.G. Sugar Limited

Not available 60 Klpd 2002 2002-03

17. Lauriya Distillery

S.K.G. Sugar Limited

Not available 90 Klpd 2002 2002-03



3. Approach and Methodology Adopted

The approach and methodology adopted for executing the assignment has been

detailed below:

Diagnostic Study

On obtention of the above information a Revival Strategy has been adopted. The

framework of the same is as follows:

Unit Visit

Collection of Preliminary information

Unit Valuation-Assets

Analysis of the existing liabilities

Litigation Status against BSSC/units

Land Title Deed

SBICAP Team along with Sugarcane Industries Department

To assess the status of the sugar units

Sugarcane Industries Department

To understand the details about the financial position of the respective sugar units.

To assess the current value & remaining life of the assets.

Through Chartered Engineers: K.S. Projects & Process Engineers Private Limited.

To suggest measures of settlement/waiver of liabilities.

Reports submitted by the SID.

Through Land valuer

To assess the value of land .

To understand the legal implications in case of reorganization of units amid existing pending cases.

Through Legal Consultant.



Unitwise Analysis

Viable Units Un-Viable Units

Suggestions for unitwise strategy

Proposal submitted to SID, GoB for

approval/suggestions

Approval from GoB along with

suggestions/alterations and appropriate

strategy

Invitation for Bids (RFP-RFQ)

Selection of Investor

Preparation of Transfer Documents

Handholding Support to SID for transfer of

units to Investors



Section – II

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AAAnnnddd

SSSuuugggaaarrr IIInnnddduuussstttrrryyy PPPrrrooofffiiillleee


SBI Capital Markets Ltd. 13

4. The Sugar Industry

4.1 Nature of Industry and Current Trend

Sugar is a cyclical Industry. The cycle is pictorially explained below:

At present the Indian Sugar Industry is passing through the phase of recession.

Sugar production in India is expected to cross 27 mt in SY07 taking closing

inventories (end September 07) to over 50% of the forward demand. Therefore,

domestic prices are expected to remain subdued and it is expected that current

levels of sugar price of Rs.13.5 per kg (UP) would be continuing in the near

future as well.

Further, export market profitability remains muted because of low international

prices and the rupee being strong – export subsidy is unlikely to help the

industry in a meaningful manner.



This brings us to the view that standalone sugar mills would always be

vulnerable when the Industry go downward, as compared to integrated units.

4.2 Possible business models for a sugar company

1) Sugar – Mollases – Bagasse Model - Only sugar manufacturing & selling by-

products without any value addition

2) Sugar – Alcohol – Bagasse Model – Sugar manufacturing and molasses being

again converted into alcohol & further to ethanol and bagasse is sold without any

further value addition.

3) Sugar – Molasses – Power Model – Sugar manufacturing and bagasse based

co-generation, however, molasses is sold without any value addition.

4) Sugar – alcohol – power model – This is the integrated and most widely

preferred model wherein apart from the sugar manufacturing even the by-

products are further processed to manufacture alcohol/ ethanol and generate

power. An integrated model helps in protecting revenues and improving

profitability during periods of downturn in core sugar business. For e.g. sugar

prices fell sharply due to oversupply in the market but alcohol/ power sprices

were relatively stable and contributed heavily to the profitability.

4.3 Revival of Mandatory Ethanol-Blending Programme

The policy has again got revived and a national programme to blend 5% ethanol

with petrol has become effective from November 01, 2006. The programme has



been extended to the entire country except the states in North-east, J&K,

Lakshadweep and Andaman and Nicobar islands. However, the programme has

not been made mandatory and oil companies have been given freedom to protect

their commercial interests at arriving at a viable ethanol pricing. It is estimated

that by 2010-11, around 2500 mn ltr of alcohol/ ethanol will be required to meet

the demand for blending and for industrial, potable and other purposes. In the

event 10% blending becomes mandatory than around 3500 mn lts of alcohol/

ethanol will be required to satisfy the demand. In the event, even if the entire

molasses produced is processed into alcohol, the quantity of molasses required to

meet the projected demand will be 11.3 mn tones and 15.5 mn tones at 5% and

10% blending respectively .

4.4 Status of sugarcane based industry in Bihar Vs. other states

In 1930s, State of Bihar contributed around 30% of the total sugar production of

country which has now come down to 2% [Chart given below]. In 1930s 35 sugar

mills existed as against 28 in 1980s and 9 in 2006. Sugar mills are mostly

concentrated in two districts viz. West Champaran and Gopalganj.

S TATEM ENT S HOWI NG N ET B I H AR S UGAR P ROD UC TI ON % TO ALL I NDI A P ROD UC TI ON ( 5 YER S AVER AGE) FROM 19 3 1- 3 6 TO 2 0 0 1- 0 6

31.74

25.21

2.022.072.763.403.734.214.897.79

10.7714.13

16.3718.6718.41

0

5

10

15

20

25

30

35

1931-36

1936-41

1941-46

1946-51

1951-56

1956-61

1961-66

1966-71

1971-76

1976-81

1981-86

1986-91

1991-96

1996-01

2001-06



The downfall of the sugar industry in the state of Bihar was mainly due to non-

availability of sufficient quantity of sugarcane on account of lack of infra-

structure such as main and village link, lack of irrigation facilities, non-

availability of power, water logging in the absence of drainage etc. and non-

availability of good sugarcane varieties on a regular basis.

In Bihar the intensity of cane is not as high as compared to several sugarcane

producing regions in North India and the main reason for the same is that out of

the total cultivable area a sizeable portion is low-lying area which is not suitable

for cultivation of sugarcane in the absence of drainage facilities. The productivity

of sugarcane i.e. yield is 41.4 tonne per hectare in Bihar is much lower than the

national average of 59.4 tonne per hectare (Source- Co-operative Sugar, Nov.,06).

Among other major sugar producing states, sugar factories of Uttar Pradesh are

facing “Cane War” since new factories have been allowed to be established in

close proximity to existing sugar factories. In Tamil Nadu, the sugar factories

normally bring sugarcane from distance ranging from 50 to 60 kms and in some

cases even from distances upto 100 kms. In Maharashtra, the main cause for

sickness in the sugar sector is the establishment of sugar factories in the close

proximity of each other resulting in lack of availability of sufficient quantity of

sugarcane to each factory.

An effort has been made to map the status of sugarcane based industry in State

of Bihar vis-à-vis various others Indian states based on the various parameters to

understand the hidden and upside potential of sugarcane based industry in

Bihar. It may be mentioned that the data down below in the tables is upto 2004-

05 during which period it was draught in the state of Maharashtra and

Karnataka and a slight distortions and the decline in performance and



parameters has been seen in respect of these two states which may be considered

as temporary.

4.4.1 Area under cultivation in State of Bihar

The area under sugarcane cultivation in Bihar as compared to states which are

not much larger in size is very small and thus there is a great potential for

enlargement of the sugarcane growing area. This should be considered in the

perspective of the fact that Bihar has very fertile land and also has some

perennial rivers flowing through it there is very heavy rainfall in the state. All

this further underscores the potential of Bihar to emerge as a major sugarcane

growing state.

Table 1: State wise area under cultivation (in '000 hectares)

Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

State

Maharashtra 460 530 590 595 578 573 443 324

Uttar Pradesh 1985 1975 2011 1938 2035 2149 2030 1955

Karnataka 310 339 373 417 407 383 243 178

Tamil Nadu 283 306 316 315 231 261 192 232

Bihar 108 107 97 94 113 107 104 104

4.4.2 Annual production of sugar in State of Bihar

The annual sugar production in the state is also very low when compared to

other states. This is mainly due to the very small area under sugarcane

cultivation but also due to less scientific way in which sugarcane is grown in

Bihar. This can be significantly improved by bringing in more area under



sugarcane cultivation and cultivating high yielding varieties of sugarcane in the

state.

Table 2: State wise annual production (in ‘000 tonnes)

Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

State

Maharashtra 38174 47151 53143 49589 45140 42167 25668 20475

Uttar

Pradesh 129267 116483 115419 106068 117982 120948 112754 118715

Karnataka 28332 34771 37567 42924 33017 32485 16015 14276

Tamil Nadu 30183 33765 34285 33188 32620 24165 17656 23396

Bihar 4960 5101 4089 3988 5211 4521 4286 4112

4.4.3 Yield of sugarcane production in State of Bihar

The yield per hectare is much below that of other sugar producing states,

highlighting the fact that cultivation is not done in a very scientific manner and

that hybrid high yielding varieties that are currently in cultivation in other states

are most probably not grown in the state. However, this indicates that there is

scope for great improvement.

Table 3: State wise yield (tonnes per hectare)

Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

State

Maharashtra 83 89 90.1 83.3 78.1 74.4 57.9 63.2

Uttar Pradesh 65.1 59 57.4 54.7 58 56.3 55.5 60.7

Karnataka 91.5 102.6 100.7 102.9 81.1 84.9 65.8 80.2

Tamil Nadu 106.7 110.3 108.4 105.3 101.6 92.4 91.9 100.8

Bihar 45.9 47.7 42 42.6 46 42.1 41.4 39.5



4.4.4 Sugarcane crushed in State of Bihar

Table 4: State-wise sugarcane crushed ('000 tonnes)

Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

State

Maharashtra 34584 47897 57079 57649 48387 53441 29077 19456

Uttar Pradesh 40907 41270 48788 48961 55209 59271 46352 51472

Karnataka 9110 13108 14815 14930 14450 17303 10942 10283

Tamil Nadu 14593 19594 18693 18479 19141 16645 9282 11492

Bihar 3118 3016 3994 3161 3898 4537 2932 2650

4.4.5 Duration of crushing season in State of Bihar

The sugarcane growing season is also of a smaller duration than other sugarcane

growing states which means that the sugar mills would remain in operation only

during a small part of the year. This in turn reduces the viability of standalone

sugar mills and emphasizes the importance of both increasing the duration of the

crushing season and establishing integrated mills that can remain profitable

during the time of the year when crushing is not possible.

Table 5: State wise duration of crushing season (days)

State /Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

Maharashtra 139 160 174 146 125 122 76 67

Uttar Pradesh 116 114 132 125 150 158 114 117

Karnataka 127 171 174 157 142 157 105 100

Tamil Nadu 171 207 182 180 195 173 111 143

Bihar 112 108 130 103 117 125 81 82



4.4.6 Recovery Rate in State of Bihar

When we take a look at the sugar recovery rate in Bihar we find that it is not very

bad compared to the other states, which means that a sugar industry in Bihar is

operating at almost comparable efficiency as the other states. The state thus has

the potential of becoming a major sugarcane producer and thus can generate

revenues for the state and direct - indirect local employment for thousands of

people once the sugarcane based industry is revived. But then as mentioned in

the other paragraphs, concrete steps have to be taken to grow adequate quantity

of good quality of sugarcane so that any new unit set up does not suffer from

supply constraints.

Table 6: State wise sugar recovery rate (%)

State /Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05P

Maharashtra 11.12 11.14 11.39 11.63 11.6 11.64 10.92 11.39

Uttar Pradesh 9.78 9.04 9.34 9.71 9.52 9.53 9.82 9.79

Karnataka 10.52 10.47 10.64 10.75 10.72 10.79 10.19 10.11

Tamil Nadu 8.42 8.83 9.2 9.64 9.61 9.88 9.92 9.64

Bihar 9.51 8.54 9.2 9.11 8.78 9.0 9.33 9.58

It may be concluded from the above six tables that there is lot remains to be done

with respect to sugarcane based industry in State of Bihar. It is evident from the

above that the efficiency in terms of yield etc can be improved drastically with a

well thought strategies and programme. The chart below shows the 5 years

average recovery in State of Bihar vis-à-vis all India recovery since 1931.



8.748.86

9.409.44

10.60

10.0610.22

9.9310.08

9.88

9.54

9.85

9.38

9.86

9.509.70

8.89

9.81

9.11

9.84

9.07

9.96

9.08

9.93

9.09

10.02

9.11

10.08

9.23

10.25

8.00

8.50

9.00

9.50

10.00

10.50

11.00

19 3 1-3 6

19 3 6 -4 1

19 4 1-4 6

19 4 6 -5 1

19 5 1-5 6

19 5 6 -6 1

19 6 1-6 6

19 6 6 -7 1

19 7 1-7 6

19 7 6 -8 1

19 8 1-8 6

19 8 6 -9 1

19 9 1-9 6

19 9 6 -0 1

2 0 0 1-0 6

STATEMENT SHOWING SEASON-WISE (5 YEARS AVERAGE) BIHAR AND ALL INDIA RECOVERY FROM 1931-36 TO 2001-06

BI H AR RECOVERY% A LL I N DI A REC OVERY%

4.5 STUDY OF EXISTING SCENARIO IN STATE OF BIHAR

a) Number of units in operations

Year No. of sugar mills Crushing capacity (tonnes)

1980 28 34000

2006 9 34450

It is evident from the table above that the crushing capacities have remained the

same mainly due to the fact that most of the units have closed and the existing

units have increased their capacities. The mills who have ploughed back their

profits in ramping up the capacities have survived and rest others have closed.

b) Capacities Ramp up by existing mills

S.No. Factory Crushing capacity

1980 2005

1 Harinagar 1920 8500



2 Bagaha 1100 2500

3 Narkatiaganj 1500 5000

4 Majhaulia 2000 3500

5 Riga 1300 3500

6 Hasanpur 1300 1750

7 Harkhua 1300 5000

8 Sidhwalia 1100 2500

9 Sasamusa 1100 2200

TOTAL 12620 34450

Going forward, ramping up of capacities backed by the adequate availability of

sugarcane for feeding mills and achieving economies of scale would be

important consideration in reviving the sick sugar mills.

c) Distance Criteria

The Central Government vide its recent notification has specified that no sugar

factory shall be set up within the range of 15 kms of an existing sugar factory or

another new sugar factory, provided that the State Government may with prior

approval of the Central Government, notify such minimum distance higher than

15 kms in their respective States.

The above distance criteria of 15 kms in the case of sugar factories in Bihar may

considered to be highly inadequate, in view of both low intensity of sugarcane

and low productivity of sugarcane due to reasons mentioned above. As a result

the sugar factories have historically faced the chronic problem of lack of

availability of adequate quantity of cane commensurate with their crushing

capacity resulting in large scale sickness in the industry due to which out of



twenty eight factories in 1980, nineteen factories have closed down and only nine

factories in the private sector are presently working.

In this connection it may be mentioned that Tuteja Committee (set up by the

Food Ministry under the Chairmanship of Shri S.K. Tuteja secretary, Department

of Food and Public Distribution in March, 2004 for suggesting measures for

revitalization of sugar industry) has also recommended a minimum radial

distance of 25 km between two sugar factories, based on the availability of

sugarcane for a 5000 TCD plant.

4.6 Conclusion

To attain the long term sustainability / viability of sugar mills, the focus should

be to create the large capacities integrated sugar complexes. Further it needs to

be ensured that the mills getting revived under this package could eventually

expand their capacities to 10000 tcpd each. It is therefore essential, in the larger

interest of these mills (getting revived), to identify the command area which

could eventually cater to above capacities of sugar mills.

Accordingly, GoB should adopt the policy of long term reservation of cane areas.

Once the units are confident that the given area would remain with them on a

permanent basis, they can undertake intensive cane development work which

would help in improving the productivity of sugarcane, which will ultimately

benefit the sugarcane farmers and the mills.



5 Sugar Units-Locational Map



Section III

RRREEEVVVIIIVVVAAALLL PPPLLLAAANNN



6 Scope of Work

As per the work order awarded by Government of Bihar (GoB), a diagnostic

study on as is where is basis, which inter alia included valuation of assets,

analysis for future viability based on operational and financial parameters, and

suggestions for revival plans. Accordingly, technical consultants & valuers were

appointed to value the assets and analyse the units’ health on as is where is basis.

Further, financial analysis of the units has been done by SBICAP based on the

internal audit report of the units provided. The viability and unviability of the

operations have been discussed in detail in the unitwise report, however,

summary of the same is given below:

Unitwise Summary Plan

S. No. Unit Name Remarks 1 Banmankhi Can be expanded to 2500 TCPD + 60 KLPD distillery +

12 MW Co-Gen plant with an additional investment of Rs. 164 crore approximately. However, it is felt that since there is no sugar mill in the close vicinity, therefore cane growing area suitably be allocated to take care of the future expansions. The unit also has a farm land area of 55 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land. There is no sugar unit in the vicinity and therefore it is proposed that GoB shall allocated a can growing area based on the proposed investment plans of the potential investor which may even be sufficient to cater to the integrated sugar complex with a capacity of 10000 TCPD.

2 Bihta The unit is located about 35 kms from Patna. The plant was installed in 1938 and condition of the plant is dilapidated. No substantial expansion is possible since



land area including colony is only 24 acres only, which is located in the town area. The unit may be used for other industrial/ commercial purposes. A Greenfield plant may be considered in the farm land (located at Jinneswargarh) based on the availability of sugarcane in the area.

3 Goraul A juice based distillery of 90 klpd can be planned taking into account the milling capacity of the existing plant for which a boiler, TG and a distillery will have to be installed. The estimated cost of the project would be around Rs. 140 crore. The unit also has a farm land area of around 6.83 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land.

4 Guraru The plant is very old and of small capacity. It is also in poor condition and cannot be expanded in a small area and can be explored for alternative commercial / industrial uses.

5 Hathua & Hathua Distillery

Located in Gopalganj district, where three private sugar mills are operating with a total capacity of 9700 TCPD. The unit may be expanded to 2500 TCPD alongwith 12 MW Co-gen plant. Hathua distillery of 60 KLPD may be used for production of alcohol/ ethanol out of the juice produced from Hathua unit. The estimated cost of the unit would be Rs. 164 crore approximately. The attachment of Hathua distillery with Hathua sugar unit will improve the viability and thereby investors’ interest. The unit also has a farm land area of around 10 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land. As indicated above, GoB can allocate the maximum



possible cane growing area to this unit taking into account the requirement of existing units and their expansion plans, if any.

6 Lauria & Lauriya Distillery

Located in West Champaran district, where four private sugar mills are operating with a total capacity of 21000 TCPD. The unit may be expanded to 1500- 2000 TCPD to cater to juice based distillery of 90 KLPD. The estimated cost for refurbishment of the sugar unit would be around Rs.140 crore approximately. Lauriya distillery of 60 KLPD may be used for production of alcohol/ ethanol out of the juice produced from the Sugar unit initially. The other 30 KLPD old distillery has become technically obsolete and therefore may be scraped. The attachment of Lauriya distillery with Lauriya sugar unit will improve the viability and thereby investors’ interest. The unit also has a farm land and outcentre land area of around 164 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land. As indicated above, GoB can allocate the maximum possible cane growing area to this unit taking into account the requirement of existing units and their expansion plans, if any.

7 Lohat There are two more sick units Sakri & Ryam which are located adjacent to the Lohat unit. Sakri is located at a distance of 15 km and Ryam is approximately 20 km from the unit. Can be expanded immediately to 2500 TCPD + 60 KLPD distillery + 12 MW co-gen plant with an additional investment of Rs.164 crore approximately. Lohat has a factory & colony land area of around 95 acres which augers well for future expansion. Given the potential of Lohat, it is proposed that Sakri may not



be revived for sugarcane based industry, which is aunit in the vicinity. Therefore cane growing area be suitably allocated to take care of the future expansions of capacity of the mill. The unit also has a farm land area of 115 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land.

8 Motipur Can be expanded immediately to 2500 TCPD + 60 KLPD distillery + 12 MW co-generation plant with an additional investment of Rs. 164 crore approximately. Motipur has a factory & colony land area of around 66 acres which augers well for future expansion and accordingly cane growing area be suitably allocated. The unit also has a farm land area of 1297 acres out of which 300 acres may be given along with the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land.

9 New Siwan The unit is inside the town of New Siwan. Transport of cane through the township is difficult. The unit can be used for other commercial / industrial purposes.

10 Ryam Ryam has a land area of around 26 acre which is very small and possibility of reviving may be difficult since Lohat unit, having better potential for revival is in close proximity. The unit can be used for other commercial / industrial purposes. However if there is no potential bidder for Lohat, Ryam may be looked for revival.

11 Sakri The unit is inside the town of Sakri and is near to Lohat (which has a bigger potential of revival). Thus while Lohat may be revived, Sakri may not be used as Sugar unit. The unit can be used for other commercial /



industrial purposes.

12 Samastipur The unit is inside the town of Samastipur. Transport of cane through the township is difficult. The unit can be used for other commercial / industrial purposes.

13 Siwan The unit is inside the town of Siwan. Transport of cane through the township is difficult. The unit can be used for other commercial / industrial purposes.

14 Suguali Located in East Champaran district with a land area of 82 acres and farm land area of around 319 acres. Can be expanded immediately to 1500 TCPD + 90 KLPD distillery + 7 MW co-generation plant with an additional investment of Rs. 140 crore approximately. Suitable cane growing area be allocated to take care of the units requirement. The farm land of 200 acres out of 319 acres may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land.

15 Warisaliganj Can be expanded immediately to 1500 TCPD + 90 KLPD distillery + 7 MW co-generation plant with an additional investment of Rs. 140 crore approximately. The unit also has a farm land area of 36 acres which may also be given alongwith the transfer of unit. The colony land may be allowed to be converted into factory land for immediate or future expansions. The adjacent farm land, if any, may be allowed to be used as factory land.

Note : 1) The above estimated cost has been worked out considering the usable plant & machinery of the respective unit. The actual investment may differ from the suggested investment based on the capacities ad configuration of machinery, as per the plan of the new investor. Thus the costs are only indicative in nature. 2) It is proposed that Farm Land which is not given to the Investor along with the unit may be used by the Government for some other industrial or agricultural purpose. Alternatively the GoB may decide to allocate the entire farm Land and outcentre Land to the investor along with the units which have been proposed viable for sugarcane based industry.



7 Appropriate Transfer Model

7.1 Mode of Transfer

The Government had acquired the units to protect the labor and cane growers

from hardship, which they were facing due to units not doing well during those

times. The acquisition was primarily oriented at ensuring continued production

of sugar and other goods, safeguard the interest of the sugarcane farmers and

laborers engaged therein. Therefore, any transfer model shall primarily ensure

the well being of cane growers as also the labours. The various transfer models

has been discussed hereunder:

The units can be transferred to the successful bidder in three possible ways.

i. Outright Sale of the Unit

The first option of outright Sale of the unit may invite litigation as the purpose of

the Government at the time of acquisition was revival of the units and thereby

outright sale of the units to private owners may lead to difficulty in transfer.

ii. Public Private Partnership (PPP)

While Public private partnership has been successful in infrastructure sector, in

manufacturing sector, the investors generally like to run the unit free from any

possible external interferences. Secondly, accepting the shareholding by carving

out a unit under PPP model would also tantamount to sale (equity holding of

BSSC in JV Company being consideration for land, building and Plant &

machinery) and may lead to legal hurdles. In addition to the above, conversion

for the value assets into equity may not bring direct cash flow which would be

required for settlement of some of the liabilities.



iii. Long Term Lease of the Unit

In case of opting for long term lease the ultimate ownership of the Land

remains with the BSSC/Government. Again the investors may also benefit for

having access to land with adequate infrastructure for sugar mill/ industrial

production. The Government has right and option to renew the Lease after

the Lease period.

In view of the above, it is proposed to adopt the Lease Model for successfully

transferring the assets for smooth revival of the units.

7.2 Rationale of Leasing Model

a) GoB will be the actual owner of the land, and its only the right of use is

being transferred to the investor on lease basis.

b) In an event when the Investors have not been able to implement the

project in specified time then the GoB would reserve the right to take back the

unit after providing adequate time and paying adequate compensation.

c) The lease model would avoid the possible litigations as indicated above.

d) The Lease model shall be adopted for sugarcane based industries in case of

revival or else the Land would be leased out for commercial or industrial

activity.

7.3 Lease Period for Land

A lease period of 60 years (further renewable for 30 years) is being proposed

for the consideration of GoB. The above lease period is being proposed

because of the following reasons:

a) It has become generally accepted norm of offering lease of land on Long

Term basis to provide continuity.



b) Long term lease provides a comfort to the lenders’ community for purpose

of creating mortgages.

c) Investment in manufacturing sector is generally made with a long term

horizon. Once substantial investment has been made, the investors’ needs

longer period to get adequate return on the investment. If the lease period is

short, long term investment may not be viable for the investor. Thus a long

term lease may be more attractive to the investor for considering substantial

investment in the unit.

d) Discussions were carried out with the prospective investors who had

earlier shown interest in investing in sugar sector in the state, and they were

comfortable only on outright sale basis, and thus it is felt that any lesser

period of Lease may not attract potential bidders for Long Term investment

in the state.

It may be mentioned that farm land attached to the unit have not been offered in the

bid process management. In order to enhance the attractiveness of the bid process, it

may be recommended to allot a portion of farm land preferably as suggested in the

table below to the potential investors in sugarcane based industry only the prices for

which has not been considered in the fair value. The farm land would be allotted on

lease basis for the similar period of 60 years and would be utilized only for the sugar

industry. The balance farm land may be utilized by Government of Bihar for other

agricultural/ industrial/ commercial purpose.



The details of the available land as provided by the GoB are as follows:

Sl No. Unit Name Factory and

Colony Land

(Acres)

Farm Land &

Outcenter land

(Acres)

Farm land proposed to

be transferred

1 Banmankhi 64.00 55.00 55.00 2 Bihta 23.78 0 0 3 Goraul 47.58 6.83 6.83 4 Guraru 24.51 0 0

5

Hathua & Hathua Distillery

67.36 10.36 10.36

6 Lauria & Lauriya Dist

61.34 164.28 164.28

9 Lohat 92.00 116.00 116.00 10 Motipur 66.00 1297.40 300.00 11 New Siwan 28.30 0.00 0.00 12 Ryam 26.02 0 0.00 13 Sakri 32.23 47.82 0.00 14 Samastipur 20.90 0.00 0.00 15 Siwan 30.38 2.20 0.00 16 Suguali 89.37 341.40 200.00 17 Warisaliganj 37.90 35.68 35.68



8 Valuation & Fair Value

8.1 Valuation

The valuation of a unit is normally done on running concern basis or fair value of

the assets. All the units of BSSC are inoperative and therefore the basis of

valuation have broadly been fair value of the assets. Valuation of both land and

plant & machinery have been done by the independent valuers and the land

valuation has been done based on both market and government rates while the

valuation of plant & machinery have been done based on the usable and scrap

value of equipment.

a) Land : Land have been valued at both market rates as also based on the

government rates. Generally, it has been observed that value as per market rate

have been more than that as per government rate and that the aggregate market

value for all the 17 units is more than the aggregate government value.

b) Plant & Machinery: An effort has been made to segregate plant & machinery

into usable and scrap items and accordingly have been valued by the

independent Chartered Engineer. The valuation report has been provided in the

unitwise reports.

8.2 Fair Value

Sugar industry in India is facing a downturn cycle due to steep fall in prices of

sugar. Further in Bihar, the cane growers have shifted to alternate crops and

although are keen to see the revival of these units to cash on this cash crop viz.

sugarcane, but at the same time are jittery as the units have remained closed for

long. From the point of view of investors, they would need to create the complete



infrastructure for running the sugar mill successfully, which would include right

from starting of development of sugarcane cultivation to ensure the availability

of sugarcane required for the mill.

In light of the above backdrop, it is felt that attracting the investor in the current

industry scenario would be difficult unless some attractive pricing structure is

framed for luring the investments in the State so that the deal becomes attractive

for the prospective investors.

The basis of arriving at Fair Value that may be considered during Bid

evaluation process has been separately discussed and suggested.



9 Settlement Process, Sacrifice & Utilisation of the Proceeds

9.1 Settlement process

The settlement process is based on the fact that the new investors would be

interested only if the units are handed over to him free from all encumbrances

and liabilities settled before the units are actually handed over. The annual

reports of the units (internal audit) have been analysed and it has been observed

that all possible liabilities as prevalent in any closed unit are there. However, for

the purpose of settlement of liabilities of these units, we have considered labour

and secured liabilities (bank dues) as the basic liabilities which are expected to be

settled out of the bid proceeds. Apart from the labour and secured liabilities

(bank dues) all other liabilities would either be waived or settled by GoB.

Further, government would indemnify the potential investor of all such liabilities

which may accrue in future as a result of takeover.

It may be mentioned that while the Land has been proposed to be offered on Long term

Lease, the ownership for Plant and Machinery including scrap is to transferred to the

Investors who would have right to sale or use the same as per their convenience.

9.2 Sacrifices

As indicated above, not all the liabilities can be met out of proceeds and therefore

certain liabilities have to be waived or met by GoB. The liabilities which have

been identified and is expected to come up in course of revival is given in the

table below. Besides certain other unidentified liabilities may also arise because

of certain court decrees or other reasons, which would also need to be settled by

GoB.



The liabilities which are to be settled and the mode of settlement /sacrifice are as

follows:

SL.

No.

Nature of

Liability

Settlement

Process

Reasons/Remarks Possible

Problems

1. Labour Dues

To be settled out

of the bid

realization

proceeds

The claims of labour

including settlement

claims need to be

satisfied before

transferring the units

to the investors for

smooth transition of

the revival package.

In case shortfall

from the

proceeds, the full

settlement may

not take place

and thereafter,

GoB has to settle

the liabilities.

2. Payment

arising due to

Court Order

May be settled

out of the

remaining

surplus

(Proceeds-1)

The amount is

contingent upon award

of any compensation to

any aggrieved party by

Court of Law and

therefore the amount

cannot be estimated

currently.

In case the

amount cannot

be paid out of

the surplus, the

same has to be

settled by GoB.

3. Secured

Loans

To be settled out

of the remaining

(Proceeds -1-2)

The secured loans are

generally from

Banks/SDF/Co-

Operative Banks who

have charge on the

assets of the unit.

In case of

shortfall, the

Government has

to settle the

liability.

4. Cane

Growers

Settled/in the

process of

As per the information

provided to us, the

No difficulty

envisaged



Dues settlement by

GoB

same has been settled

by GoB.

5. Unsecured

Loans

To be waived off The unsecured loans

are by GoB and may be

waived off since the

proceeds would not be

able to service the

same.

No difficulty

envisaged

6. Other

Liabilities

(State

Government)

To be waived off Any amount due to the

GoB may required to

be waived off, since

sufficient inflow from

the investor towards

settling the same may

not be available.

No difficulty

envisaged

7. Other

Liabilities

To be settled by

GoB

If any other liability

exists or accrues in the

process of bidding, the

same is suggested to be

taken care of by GoB.

There might be

legal issues

involved during

the bidding

process from any

aggrieved party.

The same has to

be managed

appropriately by

GoB.

8 Excise dues

Hathua

Distillery –

To be waived off

by GoB

Hathua & Lauriya

distillery have been

attached to the

Liabilities needs

to be waived by

GoB as excise on



Rs.64.72 crore

and Lauriya

Dstillery – Rs.

42 crore

respective units in the

bidding process and

therefore settlement of

excise liabilities is

important without

which Hathua and

Lauriya units could not

be put on bidding

process.

distillary is a

state subject.

9.3 Utilisation

Once the bid price is decided (of the possible alternatives provided separately)

by the appropriate authority, the same may be considered as the Reserve Price

for the unit in the Bid documents.

However the proceeds from the above may not be able to satisfy the entire

liabilities of the units and it is proposed that the proceeds may be utilized for the

following priority payments:

a. Settlement of Labor Liabilities including compulsory retirement.

b. Settlement of Bank/SDF dues to the extent of principal amount

only.

c. Settlement of dues for any claim for which Court may/has ordered

for payment of any specific amount or guided any method of

calculation for payment of such amount.



However, in an event where the proceeds from the bidding is lower than the

above claims, the Government has to make necessary arrangement for settlement

of the above dues. The liabilities shall not be transferred to the asset transferee.



10 Litigations and Settlements

10.1 Litigations

An effort was made by the Legal Counsel to identify the legal cases pending

against Bihar State Sugar Corporation/ GoB with respect of the above units,

which have been mentioned in the reports of individual units. Apart from those

there are certain other major legal cases, which has the propensity to adversely

affect the entire revival process. The legal opinion on these cases is detailed as

under:

i. Settlement of Labour Issues

As per section 11(2) of Bihar Sugar Undertakings Acquisition Act, 1985 all

persons who were workmen within the meaning of Industrial Disputes Act, 1947

engaged under the scheduled undertakings on or before 29.10.1978 became

employee of the State Sugar Corporation and there services legally deemed to be

continued without any break.

It may be worthwhile to mention that any investor would be interested to invest

only if the units are offered to him free from all encumbrances, litigations as also

the liabilities (including labour liabilities).

The units of BSSC (excluding the two distilleries) employs 1574 labours/ staffs/

officers as on February 2007. The unitwise labour liabilities both in terms of

arrears as also the settlement (based on 15 days for each completed year of

service and 45 days for the remaining service period) has been provided by the

officials of the respective units. It may be mentioned that the settlement terms



was based as per the provisions of Section 25F of the Industrial Disputes Act,

1947.

ii. Settlement of Pending Suits

It has been observed that majority of the pending legal cases are from aggrieved

labors for payment of their dues. The same would be settled once the proceeds

from the bids are allocated towards settling their dues. As per the legal opinion

the above type of issues would not be affecting the transfer process. The unit

wise litigation cases has been separately discussed in the unitwise reports and

more specifically provided in the report submitted by the Legal Counsel and

provided hereto. Besides certain erstwhile owners have also filed suit against the

GoB.

iii) Excise Matter

Excise on distillery is a state subject payable to the department of excise, GoB and

therefore the GoB can very well fix a moratorium, waive or otherwise deal with

these dues.



11 Suggested Plan of Action

a) The model suggested in this report is required to be approved by

appropriate authority of GoB, with/without suggestions/ modifications.

Thereafter, permission from the High Court is required to be taken since

Liquidation petition is pending before the Honorable Court.

b) Legal opinion regarding Winding up Petition Already Filed:

“Since no winding up order is yet been passed and no Official Liquidator is

appointed, it is within the powers of the corporation to file application for

closure and / or negotiate the matter with the concerned parties. But once

winding up order is passed and Official Liquidator is appointed then nothing

can be done unless consented and permitted by the Company Judge.

However as the Hon’be Company Judge is in the seisin of the matter, the

Court should be apprised about all the steps including unit wise bidding and

order be obtained so that the winding up petition remain pending in the

court”



12 Tendering/Bidding Process

Once the plan is approved by Honorable High Court, bids shall be invited from

various parties for Long Term Lease of the units. The investors shall have the

right to utilise/sell the existing plant and machineries to their satisfaction. The

investor would not have right to sell the land. The investor would however be

allowed to mortgage the land and other assets to its lenders for arranging debt

for the unit.

The Tendering Process shall be as follows:

a. An advertisement will be issued by GoB in major dailies with regard to

the proposed Revival package and asking the potential bidders for about

the package and units being offered.

b. The Bid documents shall also be uploaded on Government of Bihar

website.

c. The bidders shall be given a time period of 30 days for submission of the

Bid.

d. The Bid selection criteria shall be described in the Bid documents.

e. The successful Bidder has to submit a Bank Guarantee for the balance bid

proceeds at the time of execution of transfer agreements.



13 Selection Criteria

The Bidding shall be carried out in two separate parameters

i. Technical Bid

ii. Financial Bid

The eligibility of the technical part shall be the first stage of selection. The basis

of selection of Technical Bid has been enumerated in the table below.

SL No. Criteria Legend Weightage (%)

1. Group turnover <25 Crore-0

Rs. 25-100 Crore-5

>Rs.100 Crores-10

20%

2. PBT of the Group <1 Crore-0

Rs. 1-10 Crore-5

>Rs. 10 Crores-10

15%

3. Net worth of the

Group

<50 Crore-0

Rs.50-100 Crore-5

>Rs.100 Crores-10

20%

4. Proposed Total

Investment #

<Rs25 Crores-0

Rs.25-50 Crores-2.5

Rs. 50-100 Crores-5

Rs.100-150 Crores-7.5

>Rs. 150 Crores-10

20%

5. Management

Capability

Experience in Sugar

Manufacturing=> 3 Years-10

Experience in other

Manufacturing Sector=>5

years-10

Business experience in Other

15%



than manufacturing Sector

>10 Years -10

None-0

6. Proposal for

setting up sugar

unit in Bihar

already approved

by GoB

Yes – 10

No – 0

10%

# Performance guarantee of 5% of the investment amount as indicated in the bid documents to be furnished at the time of execution of transfer agreements. The guarantee will be released once the 80% of the investment proposed is made and the unit becomes operational.

The Minimum selection Criteria value shall be 3.75 based on the selection criteria

above. However in case the same is not met by sufficient number of bidders, the

minimum selection base may be further relaxed after analyzing the quality of the

bids received.

Once the Bidder is selected on the above criteria, the H1 Bidder shall be selected

based on the Highest Bid Value. The names of H2 and H3 Bidders shall also be

announced and in case of non-performance of the obligations of H1 bidder for

payment of fees, the units would be offered to the next highest bidder. However,

in case there is a tie in the financial bids then bidder with highest score in

technical evaluation will be declared as the winner.

The Bidders shall also have to submit Earnest Money Deposit of Rs.10 lakh with

their bids. The EMD of the unsuccessful Bidders shall be released after the

announcement of the H1, H2 and H3 Bidders. The EMD of H2 and H3 would be

released after part payment by H1 in a specified time. In case H1 has failed the

payment of the Bid value, the unit would be automatically allotted to H2 at a



price of H1 and EMD of H1 shall be forfeited. Similarly H3 will be considered in

case H2 fails under the bid process management.

The successful bidder would have to arrange for Bank guarantee for the unpaid

bid amount, before the documentation of the handing over of units. The signing

of lease/transfer documents would complete the process.

However in case of failure on payment by all the three Bidders above, GoB may

take appropriate decision.



14 Transfer Process

The transfer of units to be done through the following process:

a. The Bihar State Sugar Corporation/GoB shall enter into a Lease

Agreement of the unit with the Investor for a period of 60 Years to be

renewed further for 30 years.

b. The Lease Deed shall provide for Government consent for subleasing the

Land. However the initial lock in period shall be 20 years before which the

Land cannot be transferred to any other party other than to the GoB.

c. Lease deed shall provide mortgageable rights.

d. The Investor shall make the payment of the Bid amount as per follows:

Sl No. Stage % Payment Payment Time Line

1. At the time of award

of selection

10% of the Bid

Value

Payment to be made within

one month from the date of

such award

2. At the time of Signing

of the Transfer

Agreement

40% of the Bid

Value

Payment to be made on the

day of signing the Transfer

Documents

3. After 1 year from the

signing of the

Transfer Agreements

25% of the Bid

Value

To be made on the 13th

month of the signing of the

Transfer Agreements

4. After 2 years from

signing of the

Transfer Agreements

25% of the Bid

Value

To be made in the 24th

month of the signing of the

Transfer Agreement

The investor shall be required to submit a Bank Guarantee to the extent of

balance amount of the Bid value to GoB (i.e. 50%) at the time of signing of

Transfer Agreement. The BG shall be released proportionately at the time of

payment of the balance Bid amount as per the above schedule.



e. The Labour liabilities for each unit shall be settled by the proceeds from

the Bid amount. The payment may be structured in a phased manner

based on the receipt of the proceeds. However an agreement to this effect

has to be entered with the Labour Unions by the GoB whereby the

Government has to undertake the payment as per a specified schedule.

f. Depending on the success of Bids, the units for which investors are not

interested may be suitably used for some other commercial / industrial

purposes.

g. GoB may decide on identifying a nodal agency for assisting the units,

collection of lease premium and appropriating the same towards payment

of the liabilities.

h. The Government may consider to dispose of the assets of the units for

which no interest is being received from investors and may Lease the

Land for alternate commercial/ industrial / any other purposes.

i. GoB shall indemnify the potential investor for losses incurred in the event

of transfer process not being successful even after the investor meeting his

obligations in entirety. Further, GoB shall indemnify any unidentified

liabilities / events which may tend to disrupt the implementation/

operations of the unit.

j. GoB shall transfer the unit free from all encumberances to the successful

bidder within 3 months from the date of award of the unit and the initial

payment received by GoB, failing which GoB will have to pay an interest

of 15% p.a. for next 3 months on the amounts received from the investor.

If GoB fails to handover the unit in the above six months then either with

mutual agreement the time frame for handing over the land can be

extended or GoB shall refund the amount alongwith interest to the

investor.



15 Suggestions for additional incentives for inclusion in Sugar Policy

Sugar industry has been a politically sensitive industry and governmental

intervention is frequent to control on the supply as well as the prices of sugar. It

is evident that sugar industry in Bihar is lagging both in sugarcane cultivation as

also the yield because of which there has not been any substantial investment in

the recent past. Further, governmental support to promote the sugar industry in

the state was also not very visible so far. As a result, canegrowers have shifted to

alternate crop making the things more difficult for the government. It is therefore

advised to formulate a comprehensive sugarcane policy to exploit the sugarcane

growing potential of the state as also to promote the industrial development in

the state. The revival of closed sugar mills is a step in the right direction.

However, these units are closed for more than a decade and a substantial

support /concessions would need to be granted to these units to see the effective

revival of the units. It is therefore suggested that the following measures may be

considered by GoB for an overall inclusive growth and attract Investors in the

state on the continuous basis :

i. Decontrol of Molasses: Considering a downturn in Sugar Industry, the

investors shall be considering economically viable alternatives for

sustainable growth. The control on sale of molasses might act as a

hinderance to the independent sugar producing units. The

Government may approve decontrol of molasses produced by sugar

mills. Further free sale of molasses produced in the state to any other

state should be allowed. The Alcohol manufactured in the state should

also be permitted to be exported outside the state.

ii. Decontrol of Bagasse Disposal: The Baggase Disposal Policy may be

suitably framed to allow the companies to sale the Bagasse



interstate/intrastate without any control. Again the same should also

be free from any trade tax.

iii. Capital Subsidy: Presently the Government is providing 10% subsidy

on plant and Machinery subject to a maximum of Rs. 10.00 crores. To

attract bigger investment the maximum ceiling should be removed and

the subsidy may be 10% of the Plant and Machinery.

iv. For captive power plant/cogen, the current capital incentive is to the

extent of 10% which may be increased to 50% as per the present

industrial policy.

v. The State Electricity Board has to enter into a firm PPA with Co-

generation owners for excess sale. The payment mechanism may be

guaranteed by the Government of Bihar for generating interest and

better security mechanism i.e. By way of revolving Letter of Credits

which is generally followed by most of the states.

vi. Permission should be granted to sugar mills to manufacture

alcohol/ethanol from cane juice directly at the choice of manufacturer.

vii. The government may formulate proper policy for enhancing irrigation

support to the farmers by providing subsidies and equipment.

viii. It is highly recommended that the Government should provide

commitment to the investors by allocating an area of minimum 30 km

of radius directly to the new sugar unit and restriction on setting of

any other new unit in the designated area. The same is required to be

announced in the Bid document and at the time of tender process to

elicit interest from the investors.



16 Recommendations

Based on the analysis indicated above, it is proposed that GoB may approve the

following:

1. Revival plan for units and suggested course of action.

2. GoB shall approve the reserve price and Bid criteria as also the Bid Process

Management.

3. GoB shall approve the estimated cost of revival scheme and means of finance

and shall agree to fund the deficit, if any from its own sources.

4. GoB shall agree to indemnify the investor against all the present and future

liabilities which may arise out of these units in course of revival process.

5. GoB shall agree to transfer the land within 3 months failing which it would

pay interest for next 3 months @ 15% p.a. and further extension would be only

with mutual consent.

6. GoB shall waive all the unsecured loans owed by the unit and shall also agree

to settle / waive excise liabilities, sales tax, any other tax liabilities and other

liabilities.

7. GoB shall settle all the labour issues and litigations related to labour as also

other issues. Any further liability arising out of these settlements shall also be

borne by GoB directly.

8. GoB shall allow conversion of residential and colony Land for industrial

purpose and in case farm land is attached, the farm Land to be used for factory

purpose.

8. GoB shall assure the investors that they would be given single window

clearance as is being done presently by few other State Governments including

Central government in case of Ultra Mega Power Project.

9. GoB shall ensure infrastructural support to the units viz. flood control, roads,

power, irrigation and other related issues as present or support for any other



such issues which may hinder the implementation process as also the operations

of the unit.

10. GoB shall agree to lease the land for a period of 60 years (further renewable

for 30 years) and attach the farm land to the concerned unit as suggested above,

the price of which does not form part of the bid price. Incidentally, the farm land

so attached would also be on lease basis, the usage of which would be restricted

to sugarcane based industry including setting of the Greenfield unit (sugarcane

based).

11. GoB may consider providing exemptions/ incentives etc as indicated above

in the note and such exemptions shall be continued on continuous basis.

12. It is proposed to provide suitable approving powers to Industrial

Development Commissioner or any other appropriate authority for approving

various documents relating to the Bid process Management such as Tendering,

Request for Qualification, Lease Agreement and other Transfer Agreements

including modifications in the Bid process criteria and any other Act which may

be necessary for smooth revival of the units.

BANMANKHI

TABLE OF CONTENTS

1. BRIEF BACKGROUND .................................................................................................. 2

2. LOCATIONAL MAP : BANMANKHI, DISTRICT- PURNIA, BIHAR ................... 3

3. TECHNICAL SNAPSHOT............................................................................................. 4

4. FINANCIAL POSITION................................................................................................. 5

4.1 Details of Liabilities......................................................................................................... 6

5. PROPOSED REVIVAL PLAN........................................................................................ 9

6. SACRIFICE/WAIVER/SETTLEMENT...................................................................... 11

7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS....................... 13

8. LITIGATION CASES .................................................................................................... 14

9. CONCLUSIONS AND RECOMMENDATIONS...................................................... 16


SBI Capital Markets Ltd. 2 Unit-Banmankhi

1. Brief Background The Banmankhi Sugar Unit is located 500 mtrs away from nearest Banmankhi

Railway Station of Purnia District and 38 Km away from District Town of Purnia.

The factory is situated at a distance of 2 Km from approach road of Purnia-

Saharsa Road. No other Sugar Unit is located in the radius of 15 km from this

unit.

The Banmankhi Sugar Unit with 1000 TCD capacity, was incorporated in 1970 by

Purnia Co-operative Sugar Factory Limited. In 1977 it was taken over by Bihar

State Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition)

Acts. 1977.

The unit has land of 64 acres which is being used as Factory Premises-cum-

Colony Premises. It has also 55 acres of land as Farm Land.

After the take over of the unit by BSSC, the maximum cane of 10.68 lakh quintal

was crushed in the year 1982-83 (Assuming the no. of crushing days as 180 days,

capacity utilization during that year was 59%). The unit was operational till 1996-

97 but the management of BSSC took the decision of closure of the mill due to

continuous losses.



2. Locational Map : Banmankhi, District- Purnia, Bihar

BANMANKHI Sugar Unit



3. Technical Snapshot SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private

Limited (KSPL) for detailed technical assessment of the unit. KSPL have an

experience of more than two and half decades in sugar industry consultancy. The

detailed Technical Report submitted by KSPL has been attached to this report. A

brief snapshot of the technical report is provided below:

Crushing Capacity 1000 TCD Per day

Make of Plant consisting of Milling Unit: Crushing capacity 1000 TCD, Boiler Station, Power House, Clarification Section and Boiling House

Triveni Engineering

Value of the Usable Mill House Rs.3.51 crore Value of the boiler house equipments Rs.0.91crore Value of the boiling house equipments Rs.1.32 crore Value of the clarification house equipments Rs.0.37 crore Value of the power house equipments Rs.0.88 crore Value of the other equipments (incl. Boiling House Structure & Weigh Bridge)

Rs.1.64 crore

Scrap Value of material including spares Rs.0.51 crore Land Value (Valuation report enclosed) Rs. 17.00 crore

Land

The Land valuation has been done by M/s Bhartia & Associates, Chartered

Engineer, Patna. He is a Government registered valuer and also empanelled as

valuer with various Banks and Institutions including State Bank of India. The

Land value has been considered at government rates prevailing in the district.

(Rs. Crore)

Land Details Area ( Acres) Govt value Mkt. Value Factory & Colony Premises 64 17.00 17.00



4. Financial Position

As per the Internal Audit Report made available to us by the Sugarcane

Industries Department, the Balance Sheet of the Banmankhi unit as on March 31,

2006 is as follows:

Break up of Liabilities [Rs. Crore]

PARTICULARS 2006 Rs. SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 0.08 LOAN FUND 0.08 Secured Loan 0.09 Unsecured Loan 9.04 9.13

TOTAL : Rs. 9.21 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 2.37 Less : Depreciation 2.17 Net Block 0.20 Capital Work in Progress INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.79 Sundry Debtors 0.01 Cash & Bank Balance 0.22 Loans & Advances 4.03

TOTAL : (A) 5.05 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 41.89 Provisions 0.96


a)Miscellaneous Expenditure to the extent



not written off or adjusted Profit & Loss Account 46.81 Suspense Account

TOTAL :Rs. 9.21

4.1 Details of Liabilities

The above dues are based on the Internal Audit report as on March 31,

2006.

a.Secured Loan

PARTICULARS Rs. in Crore Sugar Development Fund 0.09

It may be mentioned that these lenders may have some charge on the existing

assets of the unit for their respective dues.

b.Unsecured Loan

Particulars Rs. in Crore Working Capital 0.36 Clean Loan 0.98 Revolving Fund Loan 0.06 Loan from BSFC Patna 0.20 Loan from Co-Op Bank, Patna 0.25 Investment accrued & Due 7.19

TOTAL : Rs. 9.04

The unsecured loans were infused at the time of takeover and are currently

outstanding. It has been informed that no interest is being charged on the same.

c. Cane Growers Dues

Rs Crore Cane Growers 0.50

It has been informed by SID that as on May 2007 there is no such O/s dues to the

cane growers and all the dues under the above head has been settled.



d. Electricity Dues

Rs. Crore Electricity Nil

As per the Internal Audit Report, there are no dues under the above head.

e. Labour Dues

The labour dues position based on the information submitted by the unit is as

under:

Data as on Mar 2007 Labour Age Profile

Age No. of labour Above 60 11 50 to 60 95 40 to 50 13 30 to 40 0 Records not available 1 Total 120

Liability Profile (Rs. In crore) General Labour Basic Wages 8.60 PF incl. interest 12.40 Overtime 0.05 Bonus 0.88 Leave Encashment 1.52 Retention Allowance 1.14 Total 24.59 Exit Scheme for all Employees 2.70 Total Liabilities including Exit Scheme 27.29



f. Other Liabilities

The break up of other liabilities appearing in the internal audit report are as

follows:

Particulars

Rs. Crore Creditors for goods supplied 0.12 Statutory deduction 2.25 Inter unit transaction 0.02 Other liabilities 8.95 Current A/c with Hqrs. 22.36

TOTAL: Rs. 33.70

The details of inter-unit transaction and current account with headquaters has

not been verified. The SID may further require to confirm that there is no other

liability other than shown in the Internal Audit Report as on March 31, 2006.



5. Proposed Revival Plan

Based on the technical assessment, the Banmankhi unit has available

infrastructure to enable it to be expanded to 2500 TCD. The Plant can be further

diversified/integrated by setting up Cogeneration plant of 12 MW and Distillery

of 60 KLPD using B Hy molasses.

The expansion process would require an implementation period of about 15-18

months. Hence it can be inferred that the unit is viable with above proposed

expansion. However, to revive the unit, sugarcane an appropriate command area

would required to be notified and necessary support from GOB would be

needed.

The unit enjoys an excellent locational & infrastructure advantage, adequate cane

growing area. It also has the required land for expansion.

The viability of the unit may further be enhanced if the farm land of 55 acre

attached to the factory and colony premises is converted into industrial land for

doing the expansion of the unit. This shall provide more land for further

expansion of the unit. It is also proposed that the colony land may be allowed for

usage for expansion of unit, if required. The colony may be shifted to some other

location. However in case of further expansion the allotment of sugarcane

command area would also need to be suitably increased.

Considering the revival possibility with expansion to 2500 TPD with

Cogeneration plant of 12 MW and Distillery of 60 KLPD using B Hy molasses, an

incremental cost of Rs. 164 crores would be required, if some of the usable

machineries of the existing mill are refurbished and used. For efficient operation



of the unit post-revival, and considering such additional amount to be invested,

it may be worthwhile to invite private players for running the unit.

The Land along with other assets of the unit may be offered on a Long Term

Lease, (say 60 years) extendable by further 30 years to the prospective investor

for setting up of Sugar Unit, Co-generation unit and Distillery. The investor

should operate the unit for the above specified purpose.



6. Sacrifice/Waiver/Settlement

a. Secured Loans (Rs.0.09 Cr.)

It may be mentioned that the unit would need to be transferred to the potential

investors free from encumbrances and free of charge on the assets, NOC from the

existing lenders has to be obtained. Considering the same, the above liabilities

have to be negotiated and settled by the Department prior to the bid process.

b. Un-Secured Loans (Rs.9.04 Cr)

The unsecured loans are from Government of Bihar. Under the current stage it

would be difficult to get back any recovery of the loan. Considering the state of

affairs of the Corporation, it is proposed to be waived off by GoB.

3. Cane Growers Dues (Rs.0.50 Cr)

As per the information provided by the Department, as on May 2007, all the

liabilities pertaining to the cane growers has been settled. However no

independent assessment of the existing dues has been made. It may be

mentioned that it would not be practical to recover the dues, if any, from the new

investor. Considering the same, it is suggested that liability, if any, under the

above head, may be settled by the Government of Bihar.

d) Labour Dues (Rs.27.29 Cr)

No investors would normally like to takeover the unit along with any obligation

(including the labour liability) and with regard to appointment of existing

employees, investors may have the right of appointment. It may be further

mentioned that the new investor would be averse to recruiting the existing

labour based on their own screening process.



Hence an amicable settlement on all the labour issues i.e. Payment of arrears, Exit

scheme, etc has to be arrived between the Labour unions and the BSSCL before

transferring the unit to the new investor. It may be mentioned that BSSCL has

already estimated an amount of Rs.2.70 cr in the event exit scheme is offered to

all its employees. It is desirable that an Exit Policy scheme may be framed

preferably by engaging the HR consultants.

The payment of compensation structure to labour may be structured in

installment basis that may need to be paid over a period of time. Further it may

be ensured that after the change of management, the existing employees shall be

retained/employed at the sole discretion of the new management.

e. Other Liabilities ( Rs 33.70 crore)

All other liabilities (including contingent liabilities), but not limited to Sales Tax,

Income Tax, Service Tax, Excise Duty, Custom duty, any penalty imposed and

liabilities towards any Government body/ Statutory Liability, etc that may be

claimed/accrued in future has to be settled/negotiated/ waived by the GoB.



7. Utilisation of Proceeds in the Settlement Process

Once the Biding process starts and the potential investor is selected based on the

Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the bid proceeds from the investors, the same may be

appropriated into a nominated account for the unit. The priority of payment

from the account shall be as under:

1. Payment of dues to the Labour along with Exit Scheme

2. Payment of Dues to Banks and Financial Institutions incl. SDF loan,

if any.

3. Balance, if any would be transferred to BSSCL A/c. for meeting

liabilities of other units.

It is assumed that the GoB would settle/ waive all the other statutory liabilities

and therefore the same has not been considered in the priority payments.

Based on the above value, the liabilities of the labour under the Exit Scheme may

be settled. Any other liability including Government dues, Cane Growers Dues,

Bank dues, and tax arrears may be waived/settled by the GoB.



8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify the

current litigation/petitions against BSSCL for the unit.

As per the information provided by the legal advisor, there is no pending

suits/cases for recovery of compensation by the erstwhile owner. However the

following cases are pending before various Courts:

1. C.W.I.C No. 15906 of 2005 (Sri Shyamdeo Sharma vs. Bihar State Sugar

Corp. & ors.)

2. M.S. No 24 of 1995 (M/s Minakshi Enterprises, Muzaffarpur) pending in

the court of Muzaffarpur for payment of dues against the supplies of

different articles to the Godown of the Unit.

3. M.S. No 23 of 1995 (M/s Vaishali Distributors, Muzaffarpur) pending in

the court of Muzaffarpur for payment of dues against the supplies of

different articles to the Godown of the Unit.

4. M.S.No 1 of 2006 ( Food Corporation of India vs The State of Bihar and

Others) pending in the court of Sub-ordinate Judge, Purnea for payment

of difference of Levy Sugar price of Rs.21,26,936/- together with interest

@12% p.a. The case is still pending.

5. A demand of Rs.4,20,87,703.23 of the Employees Provident Fund

Organisation and for non payment of which an order of attachment of

immovable property of the unit was ssued vide letter no.

BGP/BR/RRC/1983/2006/10596 dated 13.06.2006. The dues is still

outstanding.

6. Case No. 2 of 1989 (Sri Madhav Prasad Singh, Lab Chemist) pending in

the court of Purnea relating to promotion.



The Government of Bihar may assure that the units shall be transferred to the

potential buyers “Free from All Encumbrances”. In case of any possible litigation

for the erstwhile owner / Previous Employees (for whom the settlement has

been made as per the above scheme) and due to reasons of the above litigation, if

the implementation of the revival scheme cannot be progressed during the

construction phase or stoppage of work during the operation phase, the

Government may need to address the legal issues arising if any.



9. Conclusions and Recommendations

The objective of GoB is to revive/rehabilitate the unit. Based on our

assessment/examination of the information provided by SID, GoB on the unit

and further taking into account the technical, legal, financial aspect we have

arrived to a conclusion that the unit has a potential for revival. Therefore we

suggest SID, GoB to consider the revival scheme as suggested in the proposed

Revival Plan.

TABLE OF CONTENTS

1. BRIEF BACKGROUND ............................................................................................ 2

2. LOCATIONAL MAP: BIHTA, DISTRICT - PATNA, BIHAR............................. 3

3. TECHNICAL SNAPSHOT....................................................................................... 4

4. FINANCIAL POSITION........................................................................................... 5

4.1 Details of Liabilities................................................................................................... 6

a. Secured Loan ................................................................................................................. 6

c. Cane Growers Dues ........................................................................................................ 6

d. Electricity Dues ............................................................................................................... 6

e. Labour Dues..................................................................................................................... 7

f. Other Liabilities ............................................................................................................... 7

5. ASSESSMENT OF THE UNIT ................................................................................. 9

6. ALTERNATE STRATEGY.........................................................................................10

7. SACRIFICE/WAIVER/SETTLEMENT.................................................................11

8. UTILIZATION OF PROCEEDS IN THE SETTLEMENT PROCESS .................13

9. LITIGATION CASES ...............................................................................................14

10. CONCLUSIONS AND RECOMMENDATIONS.................................................15

Private &Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Bihta

1. Brief Background The Bihta Sugar Unit is located 200 m away from Bihta Railway Station of

Patna District and 40 km away from District Town of Patna, the capital of

Bihar. The factory is situated at a distance of 1 km from approach road of

Patna-Paliganj Road. No other Sugar Unit is located in the radius of 15 km

from this unit.

The Bihta Sugar Unit with 1240 TCD capacity, was incorporated in 1934 by

South Bihar Sugar Mills Limited and after 43 years of its operation i.e. in 1977

it was taken over by Bihar State Sugar Corporation (BSSC) under Bihar Sugar

Undertakings (Acquisition) Acts 1977.

The unit has a huge land of 593.22 acres out of which 23.78 acres of land is

being used as Factory Premises, 531.59 acres of land as Farm Land at

Jineshwargarh and 28.31 at Khedalpura. They have only 9.54 acres of land as

Out Centre Land. It has also a huge Sugarcane Area of land of approximately

37650 acres.

After the take over of the unit by BSSC, the maximum cane of 4.34 lakh

quintal was crushed in the year 1981-82 (Assuming the no. of crushing days

as 180 days, capacity utilisation during the year was 59%). The unit was

operational till 1990-91 but the management of BSSC took the decision of

closure of mills due to poor cash management and continuous losses due to

non-disposal of sugar & molasses etc.



2. Locational Map: Bihta, District - Patna, Bihar

Bihta Sugar Unit



3. Technical Snapshot

SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private


experience of more than two and half decades in sugar industry consultancy.

The detailed Technical Report submitted by KSPL has been enclosed. A brief

of the technical report is provided below:

Crushing Capacity 1240 TCD

Make of Plant consisting of-Mill Unit, Boiler

Station, Power House, Clarification Section,

Boiling House, Effluent treatment Plant

Herry Meriolle, Delatters, France

Scrap value of the equipments Rs. 4.32 Crore

Land Value (valuation report enclosed) Rs. 16.39 Crore

Land


Engineer, Patna. He is a Government registered valuer and also empanelled

as valuer with various Banks and Institutions including State Bank of India.

The Land value has been considered at market rates prevailing in the district.

Land Details Area ( Acres) Value (Rs. Crore)

Factory & Colony

Premises

23.78 16.39

TOTAL 23.78 16.39





Industries Department, the Balance Sheet of the Bihta unit as on March 31,

2006 is as follows:

Break up of Liabilities

Amount (Rs. crores)

PARTICULARS 2006 SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 0.01 0.01 LOAN FUND Secured Loan 0.08 0.08 Unsecured Loan 1.21 1.21

TOTAL 1.30 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 0.03 Less : Depreciation 0.01 Net Block 0.02 Capital Work in Progress 0.15 INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.17 Sundry Debtors 0.09 Cash & Bank Balance 0.03 Loans & Advances 1.02

TOTAL 1.31 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 19.40 Provisions 0.04

TOTAL 19.44 NET CURRENT ASSETS : (18.13)

a)Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss Account 19.24

TOTAL 1.30




The dues are based on the Internal Audit report as on March 31, 2006:

a. Secured Loan PARTICULARS Rs Crore

Bihar State Financial Corporation Ltd, Patna 0.07

TOTAL : 0.07



b. Unsecured Loans

PARTICULARS Rs Crore

Other loans 0.24

TOTAL: 0.24

c. Cane Growers Dues Rs Crore

Cane Growers 0.03

It has been informed by SID that as on May 2007 there is no such O/s dues to

the cane growers and all the dues under the above head has been settled.

d. Electricity Dues Rs. Crore

Electricity Nil




e. Labour Dues As far as the records are available from the Internal Audit Report for the FY

2005-06 an amount of Rs 6.81 crores is due to the employees consisting of 32

permanent employees. However based on the subsequent information

collected from BSCC the due to labour as on February 2007 is as under:

f. Other Liabilities The break up of other liabilities appearing in the internal audit report are as

follows:

PARTICULARS 2006 Statutory deduction 0.99 Old Management 1.73 Liability for expenses 0.28 Creditor for goods supplied 0.29 Loan A/C HO Patna 11.61

TOTAL: 14.90


Age No of Labour Above 60 0 50 to 60 24 40 to 50 3 30 to 40 1 Unknown 0 Total 28

Liability Profile General Labour Rs. in crores Basic Wages 4.60 PF incl interest 0.80 Other O/s Allowance 1.38 Gratuity 0.78 Bonus 0.51 Total 8.07 Exit Scheme-considering All Employees 0.57 Net Dues including Exit policy settlement 8.64



The details of interunit transaction and current account with headquaters has

not been verified. The SID may further require to confirm that there is no

other liability other than shown in the Internal Audit Report as on March 31,

2006.



5. Assessment of the unit

An attempt was made to understand the technical competence of the unit to

be financially viable in the current market scenario as also going forward. It is

felt that the unit is both technically incompetent and financially unviable. In

this connection, it may be mentioned that given the prevailing sugar industry

parameters, sugar units are surviving mainly because of integrated Co-

generation unit and distillery. In light of above, the broad reasons for the

Bihta unit being unviable is as under:

a. The total land area including the colony area is 23.78 acre would not be

sufficient for setting up or expanding the sugar unit. Further the unit

has come within the township area.

b. The unit is located in an area where there is currently not much of

sugarcane area under cultivation. The area is also developing as an

industrial hub for other industries.



6. Alternate Strategy

Considering the above facts, it is recommended that the available land may be

used for the following Industrial/ Commercial Activity such as:

a. Food Processing Zone

b. Commercial Complex

c. Handicraft Park

d. Warehouse/Cold Storage

The above is only indicative and it is felt that it should be best left to the

investors to take up any of the commercial activity not restricted to as

indicated above.

For creation of economic activity and generation of new investment

opportunities, the premises of the above unit may be used but not restricted

to the above purpose. For the same, it is understood that the land may be

leased to private investors on a long term basis. The valuation of a unit is

broadly done on going concern basis or fair value of the assets. The above unit

is not running and therefore the basis would be based on the fair value of the

assets. Again the new investors may not be willing to undertake any of the

existing liabilities of the unit. Based on the above, the liabilities may be

suitably waived/settled/adjusted/negotiated by Government of Bihar and

the unit may be transferred to the potential investor free from all

encumbrances and the investor should pay for the assets being acquired.

Therefore, the Land would need to be handed over on long term lease basis

and the existing machineries would need to be sold through a bidding process

to the prospective investor based on a minimum Reserve price. Liabilities etc.

would need to be settled accordingly to generate the investors’ interest.




The unit may not be revived as sugarcane based unit due to difficulties

envisaged and noted above. Therefore the same has to be developed for other

industrial purpose some of which has been mentioned above. However the

liabilities for existing dues has to be satisfied.

a. Secured Loans (Rs. 0.07 Cr.)

It may be mentioned that the unit would need to be transferred to the

potential investors free from encumbrances and free of charge on the assets,

NOC from the existing lenders has to be obtained. Considering the same, the

above liabilities have to be negotiated and settled by the Department prior to

the bid process.

The dues from Bihar State Financial Corporation Ltd as on date has to be

settled/waived and necessary initiative has to be taken by the Sugarcane

Industries Department.

b. Unsecured loans (Rs. 0.24 Cr)

The unsecured loans are from GoB. Under the current stage it would be

difficult to get back any recovery of the loan. Considering the state of affairs

of the corporation, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Rs. 0.03 Cr)




mentioned that it would not be practical to recover the dues, if any, from the



new investor. Considering the same, it is suggested that liability if any under

the above head may be settled by the Government of Bihar.

d. Labour Dues (Rs. 8.64 Cr)

As indicated above, even if the unit is unviable from Sugar perspective, it

would be necessary to settle the dues in order to explore the other options for

making the effective utilization of the industrial land.

Therefore, an amicable settlement on all the labour issues i.e. Payment of

arrears, VRS, etc has to be arrived between the Labour unions and the BSSCL

before transferring the Land to the new investor. It is desirable that an Exit

Policy scheme has to be framed preferably by engaging the HR consultants.


installment basis.

e. Other Liabilities (Rs. 14.90 Cr)

All other liabilities (including contingent liabilities), but not limited to Sales

Tax, Income Tax, Service Tax, Excise Duty, Custom duty, any penalty

imposed and liabilities towards any Government body/ Statutory Liability,

etc that may be claimed/accrued in future has to be settled/negotiated/

waived by the GoB.



8. Utilization of Proceeds in the Settlement Process

Once the Biding process starts and the potential Investor is selected based on

the Bid Criteria, the Transfer Agreements have to be drafted and executed.

On realization of the price from the highest bidders, the same may be




2. Payment of Dues to Banks, Financial Institutions and SDF, if any (in

case not settled by the Government of Bihar),



It is assumed that the GoB would settle/ waive all the other statutory

liabilities and therefore the same has not been considered in the priority

payments. However in case the labour liabilities are not being able to settled

from the above realization, the balance has to be settled by the Government of

Bihar.

Based on the above value, the liabilities of the labour under the Exit Scheme

may be settled. Any other liability including Government dues, Cane Growers

Dues, Bank dues, and tax arrears may be waived/settled by the GoB.



9. Litigation Cases

SBI Caps has appointed M/s Alok Agarwal as the Legal consultant to verify

the current litigation/petitions against BSSCL for the unit.


suits/cases for recovery of compensation by the erstwhile owner. However

the possibility of the same way not be ruled out.


potential buyers “Free from All Encumbrances”. In case of any possible

litigation for the erstwhile owner / Previous Employees (for whom the

settlement has been made as per the above scheme) and due to reasons of the

above litigation, and if the implementation of the construction cannot be

progressed during the construction phase or stoppage of work during the

operation phase, the Government shall make good the losses suffered if any.




The objective of GoB is to revive/rehabilitate the unit. However based on our



arrived to a conclusion that the unit does not have an investment

attractiveness for sugarcane based industry. Therefore we suggest SID, GoB to

consider the rehabilitation scheme as suggested in the proposed Plan.

GORAUL

TABLE OF CONTENTS


2. LOCATIONAL MAP : GORAUL, DISTRICT- VAISHALI, BIHAR......................... 3










SBI Capital Markets Ltd. 2 Unit- Goraul

1. Brief Background The Goraul Sugar Unit is located approximately 3 Km. away from approach road

of National Highway and 1 Km. from Goraul Railway Station. It is situated

around 25 Km from District Town Hazipur of Vaishali District, Bihar. The Unit is

adjoined by another BSSC owned Sugar Factory i.e. Motipur Sugar Unit.

The Goraul Sugar Unit with 800 TCD was incorporated in 1933 under the banner

of M/s. Sheetal Sugar Works Limited. After 44 years of its operation i.e. in 1977 it

was taken over by BSSC under Bihar Sugar Undertakings (Acquisition)

Ordinance 1977. The BSSC was incorporated as a wholly owned Government

Company in December 1974 without having its own Sugar Mills.

The unit has land area of approximately 54.41 acres. Out of which 47.58 acres of

land was being used for Factory Premises and Colony Premises and 6.83 acres of

land as Farm Land.

After the take over of the unit by BSSC, the maximum cane was crushed in 1982-

83 season that was 7.23 lac quintal. The unit was operational till 1993-94 but the

management of BSSC took the decision of closure of mills due to continuous

losses.



2. Locational Map : Goraul, District- Vaishali, Bihar

Goraul Sugar Unit






detailed Technical Report for Goraul submitted by KSPL has been attached to

this report. A brief snapshot of the technical report is provided below:


Make of Plant consisting of-Mill Unit, Boiler Station, Power House, Clarification Section, Boiling House

Buckau Wolf Krupp, Germany

Scrap Value of the equipments Rs 3.44 Crore Land Value (Valuation report enclosed) Rs. 23.79 Crore

Land

(Rs. Crore) Land Details Area ( acres) Govt. Value Market Value Factory Premises & Colony Premises

47.58 20.42 23.79




Land value above has been considered at government rates prevailing in the

district.





Industries Department, the Balance Sheet of the Goraul unit as on March 31, 2006

is as follows:


Amount (Rs. crore)

PARTICULARS 2006 SOURCES OF FUND: SHAREHOLDERS FUND: Capital - Reserve & Surplus - LOAN FUND Secured Loan 0.28 Unsecured Loan 0.38

TOTAL : Rs. 0.66 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 0.22 Less : Depreciation 0.07 Net Block 0.15 Capital Work in Progress INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.55 Sundry Debtors 0.01 Cash & Bank Balance 0.04 Loans & Advances 1.29

Total Current Assets 1.89 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 27.37 Provisions 0.64

NET CURRENT ASSETS : (26.12) Profit & Loss Account 26.55 Suspense A/c 0.08

TOTAL :Rs. 0.66




The above dues are based on the Internal Audit report as on March 31, 2006.

a. Secured Loan

Rs Crore Sugar Development Fund Loan 0.28



b. Unsecured Loan

Rs Crore Loan from GoB 0.38

The unsecured loan was infused at the time of takeover of these units by BSSC

and are currently outstanding. It has been informed by BSSC that no interest is

being charged on the same.




cane growers and all the dues under the above head has been settled/ in the

process of settlement.

d. Electricity Dues

Rs Crore

Electricity Nil

There are no dues under the above head.



e. Labour Dues


under:


The break up of other liabilities are as follows:

PARTICULARS Rs. in Crores Loan A/c Ho, Patna 17.25 Statutory Deduction 1.76 Inter Unit Transaction 0.02 Other current liabilities 8.34 TOTAL 27.37

The details of inter-unit transaction and current account with head quarters has

not been verified.


Age No Above 60 0 50 to 60 86 40 to 50 42 30 to 40 1 Unkonwn 0 Total 129

Liability Profile Rs. in Crore General Labour Basic Wages 6.69 Bonus 0.75 Overtime 0.02 Leave Encashment 0.14 Retention Allowance 0.45 Total 8.05 Exit Scheme for all Employees 2.30 Total labour liabilities including Exit Scheme 10.35




The Goraul Sugar plant is an old plant. Based on the technical assessment it was

suggested that except the milling tandem most of the equipment needs to be

replaced. The unit may be expended to 1500 TPD with a distillery based on juice.

For this a boiler, Turbine Generator Set and a distillery have to be installed. The

entire unit shall be converted to an electric driven plant and mills may have to be

relocated and driven by individual drives provided with rake type inter carriers,

Donnelley chutes etc. The capacity distillery may be around 90 KLPD. Hence it

can be inferred that the unit is viable with the above proposed expansion.

However, to revive the unit, sugarcane an appropriate command area would

required to be notified and necessary support from GOB would be needed.



The viability of the unit may further be enhanced if portion of the farm land

attached to the factory, if any, and colony premises is converted into industrial

land for doing the expansion of the unit. This shall provide more land for further





Considering the revival possibility with expansion to 1500 TPD with a 90 KLPD

distillery based on juice, an incremental cost of Rs.140 crores would be required,

if some of the usable machineries of the existing mill are refurbished and used.

For efficient operation of the unit post-revival, and considering such additional

amount to be invested, it may be worthwhile to invite private players for

running the unit.




a) Secured Loans (Rs.0.28 cr)


investors free of charge on the assets; NOC from the existing lenders has to be

obtained. Considering the same, the above liabilities have to be negotiated and

settled by the SID prior to the bid process.

b. Un-Secured Loans (Rs. 0.38 cr)

The unsecured loans are from Government of Bihar. Under the current scenario

it would be difficult for the unit to pay back the above loan. Therefore, it may

have to be waived off by GoB.

c. Cane Growers Dues (Rs.0.05 cr)







d. Labour Dues (Rs.10.35 cr)

No investors would willing to takeover the unit along with any obligation

(including the labour liability), and with regard to appointment of existing



labour based on their own selection process.




Scheme etc has to be arrived between the Labour unions and the BSSCL before


already estimated an amount of Rs. 2.30 cr in the event of Exit Scheme is offered

to all its employees. It is therefore desirable that an Exit Policy scheme may be

framed preferably by engaging the HR consultants.



be ensured that after the change of management, the existing employees may be


e. Other Liabilities (Rs. 27.37 cr)















if not settled by BSSCL.










8. Litigation Cases



As per the information provided by the legal advisor, there are no pending


following cases are pending at various courts:

1. Certificate Case No. 1/ 1996-97, pending before District Certificate Officer,

Hazipur, Vaishali against the Unit for electrical dues filed by Executive

Engineer BSEB, Muzaffarpur for certificate dues of Rs.17,90,705.92/-

2. Complaint Case No.135/2001, files by Ex-Employee, Gonour Ram for

retirement dues.
















Revival Plan.

GURARU

TABLE OF CONTENTS


2. LOCATIONAL MAP: GURARU, DISTRICT- GAYA, BIHAR ........................... 3


4. Financial Position ...................................................................................................... 5


a. Secured Loan ................................................................................................................. 6

b. Unsecured Loans ............................................................................................................ 6


e. Labour Dues..................................................................................................................... 7



6. ALTERNATE STRATEGY........................................................................................ 9






SBI Capital Markets Ltd. 2 Unit- Guraru

1. Brief Background The Guraru Sugar Unit is located 0.5 km away from Gaya Railway Station

and is very near the District Town and National Highway Road.

The Guraru Sugar Unit with 808 TCD capacity, was incorporated in 1933

under the ownership of Guraru Chini Mill Limited, later on after 46 years of

its operation i.e. in 1979 it was taken over by Bihar State Sugar Corporation

(BSSC) under Bihar Sugar Undertakings (Acquisition) Ordinance 1977. The

BSSC was incorporated as a wholly owned Government Company in

December 1974 without having its own Sugar Mills.

The unit has only a land of 24.51 acres which is being used as Factory

Premises-cum-Colony Premises and 2.85 acres as Farm Land.

After the take over of the unit by BSSC, the maximum cane was crushed in

1981-82 that was 4.48 lakh quintal in 1981-82 season. The unit was operational

till 1990-91 but the management of BSSC took the decision of closure of mills

due to poor cash management and continuous losses.



2. Locational Map: Guraru, District- Gaya, Bihar

Guraru Sugar Unit










Make of Plant consisting of-Mill Unit, Boiler Station, Power House, Boiling House

Krup Wolf

Scrap Value of material including spares Rs. 2.83 Crore Land Value (valuation report enclosed) Rs. 2.81Crore

Land

The Land valuation has been done by M/s. Bhartia & Associates, Chartered




Land Details Area ( Acres) Value (Rs. Crore) Factory Premises & Colony Premises

24.51 2.81





Industries Department, the Balance Sheet of the Guraru unit as on March 31,

2006 is as follows:


Amount (Rs. crores)

PARTICULARS 2006 SOURCES OF FUND: SHAREHOLDERS FUND: Capital - Reserve & Surplus LOAN FUND Secured Loan Unsecured Loan 0.63 0.63

TOTAL : Rs. 0.63 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 0.41 Less : Depreciation 0.00 Net Block 0.41 Capital Work in Progress INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.07 Sundry Debtors Cash & Bank Balance 0.02 Loans & Advances 0.39

TOTAL : RS. 0.48 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 13.70 Provisions 0.36

TOTAL : RS. 14.06

NET CURRENT ASSETS : -13.58 a)Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss Account 13.80

TOTAL :Rs. 0.63





2006.

a. Secured Loan

PARTICULARS Rs Crore Secured Loan Nil

TOTAL : Nil



b. Unsecured Loans Rs. Crore

PARTICULARS 2006 Loan from GoB 0.55 Revolving Fund 0.01 Agriculture Development Loan 0.02 Interest Accrued & Due 0.05

TOTAL : 0.63 c. Cane Growers Dues Rs Crore

Cane Growers Nil


the cane growers and all the dues under the above head has been settled/ in

the process of settlement.


Electricity Nil




e. Labour Dues We have collected the latest age profile and dues position which is as under:

The above labour details are based on the Internal Audit Report submitted by

SID and further information collected from the unit. We have prepared the

above details and O/s dues based on the information submitted by them.



follows:

PARTICULARS 2006 Security Deposit 0.01 Inter Unit Transaction 0.09 Current account with HO 7.79

TOTAL: 7.89


Age No of Labourers Above 60 0 50 to 60 38 40 to 50 8 30 to 40 0 Unknown 1 Total 47

Liability Profile General Labour Rs. in crores Basic Wages 3.40 PF 1.20 Upadhan 0.96 Leave Encashment 0.19 Retention Allowance 0.00 Total 5.89 Exit Scheme-considering All Employees 0.70 Net Dues including Exit Scheme settlement

6.59



5. Assessment of the Unit







Goraru unit being unviable are as under:

1. The plant is very old and of small capacity. It is also in poor condition

and can not be expanded in a small area that it has.

2. Given the milling size, the crushing capacity can be increased to 1500

TCPD, however the crushing unit of this size would need a 90 klpd

distillery for which there is no space in the factory;

3. The plant is very congested and the equipment is placed on brick

structure.




Considering the above, it is recommended to use the Land for some other

Industrial/Commercial Activity such as:

1. Food Processing Zone

2. Commercial Complex

3. Handicraft Park

4. Warehouse/Cold Storage



indicated above.



















a. Secured Loans (Nil) It may be mentioned that the unit would need to be transferred to the




the bid process.

b. Un-Secured Loans (Rs. 0.63 Cr) The unsecured loans are from Government of Bihar. Under the current stage

it would be difficult to get back any recovery of the loan. Considering the

amount of loan, it is proposed to be waived off by GoB.

c. Cane Growers Dues (Nil) As per the information provided by the Department, as on May 2007, all the



mentioned that is would not be practical to recover the dues, if any, from the



d. Labour Dues (Rs. 6.59 Cr) As indicated above, even if the unit is unviable from Sugar perspective, it




arrears, VRS, etc has to be arrived between the Labour unions and the BSSC






installment basis.

e. Other Liabilities (Rs 7.89 Cr) All other liabilities (including contingent liabilities), but not limited to Sales




waived by the GoB.












3. Balance, if any would be transferred to BSSC A/c. for meeting






Bihar.






9. Litigation Cases


the current litigation/petitions against BSSC for the unit.



the following cases are still pending at various courts:

1. Certificate Case No. 121/1993 – 94, pending in the court of Certificate

Officer, Gaya filed by the Bihar State Electricity Board, for Electrical

Dues and the demand notice for certificate dues of Rs. 16,37,679.24 plus

interest thereon a total demand of Rs. 29,34,380.76 is issued which is

still pending.

2. C.W.J.C. No. 4606 of 2006 (ram Balak Vs. SugarCorp. And ors.) …

Service Matter. Retirement Dues

3. C.W.J.C. No. 5028 of 2000 (Krishna Kumar Vs. Bihar State Sugar Corp.)

… Service Matter














arrived to a conclusion that the unit does not have a investment attractiveness

for sugar unit Therefore we suggest SID, GoB to consider the revival scheme

as suggested in the proposed Revival Plan.

HATHUA

TABLE OF CONTENTS


2. LOCATIONAL MAP: HATHUA, DISTRICT- GOPALGANJ, BIHAR.............. 3




5. PROPOSED REVIVAL PLAN (HATHUA SUGAR UNIT AND DISTILLERY)9






SBI Capital Markets Ltd. 2 Unit- Hathua & Hathua Distillery

1. Brief Background Sugar Unit

The Hathua Sugar Unit is located 1 km away from nearest Hathua Railway

Station of Gopalgunj District and 20 km away from District Town and 1.5 km

distance from National Highway approach road on Siwan-Gopalgunj Road.

The Unit is adjoined by another private sector owned Sugar Unit i.e.

Gopalgunj Sugar Unit which is at a distance of 20 km approximately.

The Hathua Sugar Unit with 1728 TCD capacity, was incorporated in 1933

under the ownership of S. K. G. Sugar Limited, it was taken over by Bihar

State Sugar Corporation (BSSC) under Bihar Sugar Undertakings

(Acquisition) Acts 1985. The BSSC was incorporated as a wholly owned

Government Company in December 1974 without having its own Sugar Mills.

The unit has an area of 55.24 acres, out of which 25.96 acres of land is for

Factory Premises and 18.92 acres of land as Colony Premises.

Distillery The Hathua Distillery of 30 KLPD capacity was under the ownership of S.K.G.

Sugar Limited till 1981. Thereafter the same was sold to United Distillery

Private Limited (UB Group). In 1986 it was taken over by Bihar State Sugar

Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1985.

The acquisition was challenged by UB Distillery Ltd. in the Hon’be Supreme

Court mainly on the ground that vesting under Section 3(1) of the Act 1985 is

only for the Sugar Schedule undertaking and not for the Distillery and vide

interim order dated 7.02.1986, the Hon’be Supreme Court stayed the take over

of the Distillery and allowed the company to operate the Distillery. However

as per the final judgment of the Hon’be Supreme Court dated 18.02. 2003, the

Distillery became the undertaking of BSSC.



2. Locational Map: Hathua, District- Gopalganj, Bihar

Hathua Sugar Unit & Distillery



3. Technical Snapshot A. Hathua Sugar




A brief snapshot of the technical and valuation report is provided below:

Particulars Capacity

Hathua Unit 1728 TCD

Make of Plant consisting of-Mill Unit, Boiler Station, Power House, Clarification Section, Boiling House, Effluent treatment Plant

Henry Merielle, France and A.W. Smith & Co.,

Glasgow Value of the Usable Mill House Rs 4.92 Crore Value of the boiling house equipments Rs 4.03 Crore Value of the other equipments Rs 3.03 Crore Scrap Value of material including spares Rs 1.83 Crore Land Value-at market rates (Valuation report enclosed)

Rs. 32.19 Crore

Hathua Distillery 30 KLPD

Make of Plant CVL Value of the Plant Rs 8.47 Crore Scrap Value of material including spares Rs 0.29 Crore Land Value-at market rates (Valuation report enclosed)

Rs. 17.22 Crore

Land




The Land value has been considered at government rates prevailing in the

district.

(Rs. in Crore) Land Details Area ( Acres)1 Govt. Value Market Value Hathua Sugar Unit 44.88 25.55 32.19 Hathua Distillery 22.48 13.10 17.22

1 The unit area has been provided by GoB .




As per the Internal Audit Report made available, the break up of Balance

Sheet of Hathua unit as on March 31, 2006 and that for Distillery as on March

31, 1999 is as follows:

Break up of Liabilities-Sugar Mill/ Distillery

Amount (Rs. crores)

PARTICULARS Hathua Hathua Distillery 2006 1999

SOURCES OF FUND: SHAREHOLDERS FUND: Capital 0.00 Reserve & Surplus -2.02 LOAN FUND Secured Loan 2.25 Unsecured Loan 1.02 1.02

TOTAL 1.02 0.23 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 5.74 6.07 Less : Depreciation 5.26 2.89 Net Block 0.48 3.18 Capital Work in Progress 0.00 INVESTMENTS : 0.21 CURRENT ASSET , LOANS & ADVANCES Inventories 1.86 5.59 Sundry Debtors 0.73 9.17 Cash & Bank Balance 0.01 2.59 Loans & Advances 3.28 1.59

TOTAL 5.88 18.94 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 50.22 22.10 Provisions 1.39

TOTAL 51.61 22.10 NET CURRENT ASSETS : (45.73) -3.16

a)Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss Account 46.27 0

TOTAL 1.02 0.23




The dues in Hathua unit are based on the Internal Audit report as on March

31, 2006 while in case of Hathua distillery it is based on Internal Audit report

as on March 31, 1999 submitted by BSSC.

a. Secured Loan

Unit PARTICULARS Rs. in Crore Hathua Bihar State Co-operative Bank Limited

(31.03.2006) 1.02 Hathua Distillery

Bihar State Co-operative Bank Limited (31.03.1999) 2.25

TOTAL 3.27



b. Cane Growers Dues

Rs. Crore Cane Growers 2.21


the cane growers and all the dues under the above head has been settled.

c. Electricity Dues

Rs. Crore Hathua Sugar Unit Nil

Hathua Distillery 1.59

TOTAL 1.59

d. Labour Dues

Based on the Internal Audit Report for the financial year 2001-2002, an

amount of Rs. 6.34 crore was due to all the employees. However, we have

collected the latest age profile and dues position which is given below.



Hathua unit

Hathua Unit

Hathua Distillery

The above details are based on the information provided by the unity and has

not been backed by written confirmation.

2 The above liability is only indicative based on information provided and may vary with the actuals.

Data as on March 2007 Labour Age Profile

Age No. of Labour Above 60 8 50 to 60 87 40 to 50 28 30 to 40 0 Unknown 1 Total 124

Labour Dues Break-Up Rs. in crores General Labour

Basic Wages 5.29 PF incl interest 4.28 Gratuity 2.37 Bonus 0.88 Retention Allowance 0.00 Total 12.82 Exist Scheme for All Employees 1.47 Total Liabilities including Exit Scheme settlement 14.29

Liability Profile Rs. in Crores General Labour Total o/s salary including PF, Gratuity, Bonus, Retention Allowance

15.00

Total 15.00 Exit Scheme for All Employees 3.00 Total Liabilities including Exit Scheme 18.002



e. Other Liabilities


follows:

Hathua Unit

PARTICULARS Rs. in Crores Statutory deduction 3.21 Contractors 0.01 Creditors for cane supplied (year wise) 2.21 Cane Grower Advance 0.02 Current A/c with Hqrs 33.32 Vendor account Cane commission (year wise) 0.13

TOTAL 38.90




2006.

Hathua Distillery

PARTICULARS Rs. in Crores Sundry Creditors 22.03 Sales Excise Liability 64.72

TOTAL 86.75



5. Proposed Revival Plan (Hathua Sugar Unit and Distillery)

Based on the technical assessment, the Hathua unit has available

infrastructure to enable it to be expanded to 2500 TCD along with a new 12

MW Co-generation Power Plant. The expansion process would require an

implementation period of about 16-18 months. In this connection it may be

mentioned that a sugar mill is expected to have a minimum economic size of

2500 TCD. Hence it can be inferred that the unit is viable with above proposed

expansion. It may also be suggested that the existing Hathua Distillery of

capacity 30 KLPD to be combined along with the Sugar unit to attract the

investors and enhance the viability of the unit.

The unit enjoys an excellent locational & infrastructure advantage, adequate

cane growing area. It also has the required land for expansion.


attached to the factory, if any, and colony premises is converted to industrial

land. This shall provide more land for further expansion of the unit. It is also

proposed that the colony land may be allowed for usage for expansion of unit,

if required. The colony may be shifted to some other location. However in

case of further expansion the allotment of sugarcane command area would

also need to be suitably increased.

Considering the revival possibility with expansion to 2500 TPD with a 12 MW

Co Generation Plant, an incremental cost of Rs. 164 Crore would be required,

if some of the usable machineries of the existing mill are refurbished and

used. For efficient operation of the unit post-revival, and considering such

additional amount to be invested, it may be worthwhile to invite private

players for running the unit.




Lease, (say 60 years) extendable by further 30 years to the prospective

investor for setting up of Sugar Unit, Co-generation unit and Distillery. The

investor should operate the unit for the above specified purpose.




Hathua Sugar / Hathua Distillery Unit

a. Secured Loans (Rs. 3.27 Crore)





the bid process.

b. Cane Growers Dues (Rs. 2.21 Crore)







c. Labour Dues (Rs. 32.92 Crore)

No investors would normally like to takeover the unit along with any

obligation (including the labour liability) and with regard to appointment of

existing employees, investors may have the right of appointment.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears,

Exit Scheme, etc has to be arrived between the Labour unions and the BSSC

before transferring the unit to the new investor. It may be mentioned that

BSSC has already estimated an amount of Rs 4.74 crore in the event of exit



scheme is offered to all its employees. It is desirable that an Exit Policy

scheme may be framed preferably by engaging the HR consultants.


installment basis that may need to be paid over a period of time. It may be

further mentioned that the new investor would not be averse to recruiting the

existing labour based on their own screening process.

e. Other Liabilities (Rs. 38.90 Crore)

All other liabilities (including contingent liabilities) in case of Hathua unit, but

not limited to Sales Tax, Income Tax, Service Tax, Excise Duty, Custom duty,

any penalty imposed and liabilities towards any Government body/

Statutory Liability, etc that may be claimed/accrued in future has to be

settled/negotiated/ waived by the GoB. The other liabilities also include

current account with Head office of Rs. 33.32 crore which has been infused as

capital.

f. Sundry Creditors (Rs. 22.03 Crore)

The detailed break up of the creditors is not available through the Balance

Sheet of Hathua distillery. However the above liability being substantial in

nature, the claims cannot e taken care out of the bid proceed and may be

settled/waived by the GoB.

g. Excise liability of Hathua Distillery (Rs. 64.72 Crore)

The amount is statutory in nature. However it is unlikely that the bid value

would be able to clear this liability. Excise on distillery is a state subject

payable to the department of excise, GoB and therefore the GoB can waive or

otherwise deal with the dues.




Once the Biding process starts and the potential investor is selected based on






2. Payment of Dues to Banks and Financial Institutions incl. SDF

loan, if any.





payments.






8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify


The following cases have been found against the Hathua Sugar unit:

1. Misc. case No. 215 of 2004 (United bank of India Vs. SKG Sugar Ltd &

others) disposed off vide order dated 5.10.2005 by the Member Board of

revenue cum authorized Officer, Bihar by which a Compensation of Rs. 5.48

Crore was awarded against the GoB/BSSC.

In the present case United Bank of India, filed a claim for compensation

amount to be paid to S.K.G. Sugar Ltd under section 7 of the Acquisition Act

1985 and after detailed hearing, the Member board of revenue cum prescribed

Authority under the Act has passed the order dated 5.10.2005 for payment of

compensation of Rs. 5.48 Crore to S.K.G. Sugar Ltd.

In the above case any surplus is generated after meeting the liabilities of the

unit, the same is required to be used for the payment of the above claim.

The following cases have been found against the Hathua Distillery unit:

1. CWJC 1152 of 2003 (S.K.G. Sugar Mill Labour Union, Distillery Unit

(Mirganj) Vs. The State of Bihar & others.

The case is in the nature of Public Interest Litigation filed by the Labour

Union of Distillery unit for payment of their wages and is not a hurdle in the

process of bidding.

2. Title Suit No. 423 of 2003 (McDowell & company Vs. The State of Bihar &

others) pending in the court of Sub Judge-I, Gopalganj, seeking relief that the

assets and properties i.e. plant and machinery valued about Rs. 23. 7 Lac are

the absolute properties of plaintiff and the defendants including BSSC has no



right or title of the assets and further seeking directions for directing the State

of Bihar to hand over the assets and properties set out in the Schedule

Annexure I to the plaint.

The Plaintiff claim certain machineries given under the Schedule of the plaint

as its own which they claim, never vested I the State of Bihar. The case does

not seem sustainable; however the case has to be taken care of so that no

adverse order is passed.

The Legal Advisor has also verified the title deeds pertaining to the Land as

opined that the BSSC has marketable Title over the property. However some

of the Title deeds were not available and therefore the valuation has been

based on the area confirmed by GoB.







operation phase, the Government may undertake to make good the losses

suffered if any.







arrived to a conclusion that the unit along with the Distillery has a potential

for revival. Therefore we suggest SID, GoB to consider the revival scheme as

suggested in the proposed Revival Plan.

LAURIYA

TABLE OF CONTENTS


2. LOCATIONAL MAP: LAURIA, DISTRICT- WEST CHAMPARAN, BIHAR.. 4




5. PROPOSED REVIVAL PLAN (LAURIA SUGAR UNIT AND DISTILLERY).12


7. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS..................15


9. CONCLUSIONS AND RECOMMENDATIONS................................................17


SBI Capital Markets Ltd. 2 Unit- Lauria & Lauria Distillery

1. Brief Background Sugar Unit

The Lauria Sugar Unit is located on the Bettiah Main Road, 25 km from

Bettiah Railway Station Town of West Champaran District of Bihar, adjoining

by three other major Private Sector Sugar Units viz. Bagaha Sugar Unit (40

km), Harinagar Sugar Unit (20 Km) and Narkatiaganj Sugar Unit (20 km).

The captioned Lauria Sugar Unit with 1626 TCD capacity, was incorporated

in 1905 under the banner of M/s. S.K.G. Sugar Limited; after 80 years of its

operation i.e. in 1985 it was taken over by Bihar State Sugar Corporation

(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977 and 1985.

The BSSC was incorporated as a wholly owned Government Company in

December 1974.

The unit has substantial land approximately 225.72 acres. Out of which 17.27

acres of land is being used for Factory Premises, 31.47 acres for Colony

Premises and 45.65 acres of land for its Agricultural use. Moreover, 118.63

acres of land is there as Out Center Land and 12.70 acres of land for its

Distillery Production.

After the take over of the unit, the maximum cane of 21.96 lac quintal was

crushed in 1990-91 season. The unit was operational till 1996-97 but the

management of BSSC took the decision of closure of mills due to receivables

management and continuous losses due to non disposal of sugar & molasses

etc.



Distillery

The Lauria Distillery of 90 KLPD capacity was under the ownership of S. K.

G. Sugar Limited till 1986. In 1986 it was taken over by Bihar State Sugar

Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1985.

The acquisition was challenged by S. K. G Sugar Ltd. in the Hon’be Supreme

Court mainly on the ground that vesting under Section 3(1) of the Act 1985 is

only for the Sugar Schedule undertaking and not for the Distillery and vide

interim order dated 7.02.1986, the Hon’be Supreme Court stayed the take over

of the Distillery and allowed the company to operate the Distillery. However

as per the final judgment of the Hon’be Supreme Court dated 18.02. 2003, the

Distillery became the undertaking of BSSC.



2. Locational Map: Lauria, District- West Champaran, Bihar

Lauria Sugar Unit & Distillery



3. Technical Snapshot A. Lauria Sugar

SBI Capital Markets Ltd. appointed K.S. Projects & Process Engineers Private



A brief snapshot of the technical and valuation report is provided below:

Particulars

Lauria Unit Crushing Capacity 1728 TCD

Make of Plant consisting of Milling Unit: Crushing

capacity 1626 TCD, Boiler Station, Power House,

Clarification Section Boiling House, Centrifugal

and Grading Section

Stork Workspoor,

Holland

Value of the Usable Mill House Rs.2.59 Crore

Value of the boiler house equipments Rs.2.48 Crore

Value of the clarification house equipments Rs.0.33 Crore

Value of the power house equipments Rs.0.58 Crore

Value of the other equipments (incl. Centrifugal

and Grading Section, Boiling House Structure &

Weigh Bridge)

Rs. 1.39 Crore

Scrap Value of material including spares Rs.1.40 Crore

Land Value-at market rates (valuation report

enclosed)

Rs 15.78 Crore

Lauria Distillery Capacity 90 KLPD

Make of Plant Alfa Level, Thermax &

Kirloskar

Value of the Plant Rs 3.47 Crore

Scrap Value of material including spares Rs 0.43 Crore

Land Value-at market rates (valuation report

enclosed)

Rs. 1.18 Crore



Land




The Land value has been considered at government rates prevailing in the

district.

(Rs. in Crore)

Land Details Area ( Acres)1 Govt. Value Market Value Lauria Sugar Unit 48.74 14.33 15.78 Lauria Distillery 12.60 0.98 1.18

1 The unit area has been provided by GoB.





Industries Department, the Balance Sheets of Lauria sugar units as on March

31, 2006 and of Lauria Distillery as on March 2001 are as follows:

Break up of Liabilities-Sugar Mill/ Distillery

Amount (Rs. crores)

PARTICULARS Lauria Sugar Unit Lauria

Distillery 2006 2001 SOURCES OF FUND:

I. SHAREHOLDERS FUND: Capital 1.20 Reserve & Surplus 5.44 II. LOAN FUND:

Secured Loan 6.58 1.91 Unsecured Loan 1.61 0.02 TOTAL: RS. 8.19 8.57

APPLICATION OF FUNDS: I. FIXED ASSETS:

Gross Block 1.61 27.51 Less: Depreciation 1.49 13.27 Net Block 0.12 14.24 II. INVESTMENTS: 0.33 III. CURRENT ASSETS, LOANS & ADVANCES Inventories 2.56 8.39 Sundry Debtors 0.31 4.22 Cash &Bank Balance 0.08 1.84 Loans & Advances 5.60 16.94 Interest accrued 0.40 TOTAL : RS. 8.55 31.79 IV. LESS: CURRENT LIABILITIES & PROVISIONS Liabilities 45.50 42.91 Provisions 1.89 4.86 47.77 NET CURRENT ASSETS: (38.85) (15.98) V. a) Miscellaneous Expenditure to the extent not

written off or adjusted Profit & Loss Account 46.92 9.99 TOTAL : Rs. 8.19 8.57




The dues in Lauria unit are based on the Internal Audit report as on March 31,

2006 while in case of Lauria distillery the are based on Audited Report as on

March 31, 2001.

a. Secured Loan

Unit PARTICULARS

Rs. in Crore

Lauria Sugar Unit

Bihar State Co-operative Bank Limited (31.03.2006) 6.58

Lauria Distillery Not available 1.91 TOTAL: 8.49



b. Unsecured Loan

Rs. Crore

Particulars 2006 Sugar unit-Revolving Fund 0.03 Distillery 0.02

TOTAL : Rs. 0.05

As per the internal report prepared by BSSCL, the above loans pertain to

March 31, 2006 and March 2001 for the sugar unit and for distillery

respectively.


Rs. Crore

Cane Growers 2.74






d. Electricity Dues

Rs Crore

Electricity Nil


e. Labour Dues

Based on the subsequent information collected from BSCC the due to labour

as on February 2007 is as under:

Name of the Unit: Lauria Data as on Mar 2007 Labour Age Profile

Age No of Labour Above 60 11 50 to 60 88 40 to 50 17 30 to 40 1 Total 117

Liability Profile (Rs. In Crore) General Labour Basic Wages 8.42 Overtime 0.24 Bonus 0.19 Gratuity 1.78 Retention Allowance 0.00 Total 10.64 Estimated cost of Exit Scheme 3.33 Net Dues including Exit Scheme 13.97



The above labour details are based on the information submitted by SID and

further information collected from the unit. We have prepared the above

details and O/s dues based on the information submitted by them.

Lauria Distillery

The above information for distillery is based on the information provided by

the unit. However no written confirmation for the same has been received

and therefore may vary.

e. Other Liabilities


follows:

Particulars Amount Liabilities for Expenses 7.28 Statutory deduction 2.66 Inter unit transaction 0.12 Other liabilities 0.03 Current A/c with HO 26.40 Lauria Distillery 14.99

TOTAL: Rs. 51.48

The details of inter-unit transaction and current account with headquarters

has not been verified. The current account with HO pertains to the capital

infused by BSSC.

2 The above liability is only indicative based on information provided and may vary with the actuals.

Liability Profile Rs. in Crores General Labour Total o/s salary including PF, Gratuity, Bonus, Retention Allowance

7.50

Total 7.50 Exit Scheme for All Employees 1.50 Total Liabilities including Exit Scheme 9.002



Lauria Distillery

PARTICULARS Rs. in Crores Sales Excise Liability3 42.00

TOTAL: 42.00

3 The Excise Liability is indicative only and may vary from the actual.



5. Proposed Revival Plan (Lauria Sugar Unit and Distillery)

Located in West Champaran district, where four private sugar mills are

operating with a total capacity of 21000 TCPD. The unit may be expanded to

1500-2000 TCPD to cater to juice based distillery.

Lauriya distillery of 60 KLPD may be used for production of alcohol/ ethanol

out of the juice produced from the Sugar unit. The other 30 KLPD old

distillery has become technically obsolete and therefore may be scraped.

The attachment of Lauriya distillery with Lauriya sugar unit will improve the

viability and thereby investors’ interest.

The unit also has a farm land area and outcenter land of around 164.28 acres

which may also be given alongwith the transfer of unit. The colony land may

be allowed to be converted into factory land for immediate or future

expansions. The adjacent farm land, if any, may be allowed to be used as

factory land.

As indicated above, GoB can allocate the maximum possible cane growing

area to this unit taking into account the requirement of existing units and their

expansion plans, if any.


Lease, (say 60 years) extendable by further 30 years to the prospective

investor for setting up of Sugar Unit, Co-generation unit and Distillery. The

investor should operate the unit for the above specified purpose.




Lauria Sugar Unit and Lauria Distillery

a. Secured Loans (Rs.8.49 Cr)


potential investors free from encumbrances and free of charge on the assets;



the bid process.

The dues of Bihar State Co-operative Bank Ltd. and of others in case of

Distillery as on date has to be settled/waived and necessary initiative has to

be taken by the Sugarcane Industries Department.


The unsecured loans are from Government of Bihar. Under the current stage







mentioned that it would not be practical to recover the dues, if any, from the






No investors would normally like to takeover the unit along with any

obligation (including the labour liability) and with regard to appointment of

existing employees, investors may have the right of appointment.

Hence an amicable settlement on all the labour issues i.e. Payment of arrears,

Exit Scheme, etc has to be arrived between the Labour unions and the BSSC

before transferring the unit to the new investor. It may be mentioned that

BSSC has already estimated an amount of Rs 4.83 crore in the event of exit

scheme is offered to all its employees. It is desirable that an Exit Policy

scheme may be framed preferably by engaging the HR consultants.


installment basis that may need to be paid over a period of time. It may be

further mentioned that the new investor would not be averse to recruiting the

existing labour based on their own screening process.






waived by the GoB.

f. Excise liability of Lauria Distillery (Rs. 42 Crore)

The amount is statutory in nature. However it is unlikely that the bid value

would be able to clear this liability. Excise on distillery is a state subject

payable to the department of excise, GoB and therefore the GoB can waive or

otherwise deal with the dues.










2. Payment of Dues to Banks and Financial Institutions incl. SDF

loan, if any.





payments.






8. Litigation Cases

SBICAP has appointed M/s Alok Agarwal as the Legal consultant to verify


The following cases have been found against the Lauria Sugar unit:

1. CWJC No 4792 of 1999 (Purushottam Mishra Vs. The State of Bihar &

others0 pending in the High Court, Patna relating to the Payment of wages.

2. CWJC No 10989 of 2004 (N.E.C.D. Union Secretary Vs. The State of Bihar)

pending in the High Court, Patna relating to the cane price payment.

3. CWJC No 98452 of 2003 (S.N Mishra Vs. The State of Bihar & others)

pending in the High Court, Patna relating to the Payment of dues of emloyees.

The following cases have been found against the Lauria Sugar unit:

1. Cr. Rev 96 of 1994 ( Sri Girish Shankar Ex- Managing Director vs The State

of Bihar) matters relates to filing a criminal case by the Excise Department

(the case has no relevance at the moment)


opined that the BSSC has marketable Title over the property. However some

of the Title deeds were not available and therefore the valuation has been

based on the area confirmed by GoB.







operation phase, the Government may undertake to make good the losses

suffered if any.







arrived to a conclusion that the unit along with the Distillery has a potential

for revival. Therefore we suggest SID, GoB to consider the revival scheme as

suggested in the proposed Revival Plan.

TABLE OF CONTENTS


2. LOCATIONAL MAP : LOHAT, DISTRICT- MADHUBANI, BIHAR..................... 3










SBI Capital Markets Ltd. 2 Unit-Lohat

1. Brief Background The Lohat Sugar Unit is located 8 Km from Pandaul Railway Station of

Madhubani District and 10 Km. away from National Highway approach road of

Pandaul. The Unit is adjoined by another BSSC owned closed down Sugar Unit

i.e. Sakri Sugar Unit (15 Km).

The Lohat Sugar Unit with 1320 TCD capacity, was incorporated in 1914 under

the ownership of Darbhanga Maharaj as Darbhanga Sugar Co. Limited, in 1977 it

was taken over by Bihar State Sugar Corporation (BSSC) under Bihar Sugar

Undertakings (Acquisition) Acts. 1977.

The unit has a substantial 207 acres of land, out of which 62 acres of land is being

used for Factory Premises, 30 acres as Colony Premises. It has also 115 acres of

land as Farm Land and 6 acres of land for residential purpose.





continuous losses.



2. Locational Map : Lohat, District- Madhubani, Bihar

LOHAT Sugar Unit






detailed Technical Report submitted by KSPL has been provided in Annexure II

of this report. A brief snapshot of the technical report is provided below:



Mirless Watson, George fletcher, Babcok & Wilcok

Value of the Usable Mill House & Boiling house equipments.

Rs 7.28 Crore

Value of the other equipments Rs 1.71 Crore Scrap Value of material including spares Rs 0.25 Crore Land Value (valuation report enclosed) Rs. 16.90 Crore

Land





(Rs. in Crore) Land Details Area ( Acres) Govt. Value Market Value Factory 62.00 6.89 12.40 Colony Premises 30.00 2.90 4.50





Industries Department, the Balance Sheet of the Lohat unit as on March 31, 2006

is as follows:

Break up of Liabilities Amount (Rs. crores)

PARTICULARS 2006 SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 0.02 0.02 LOAN FUND Secured Loan 0.51 0.51 Unsecured Loan

TOTAL 0.53 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 1.71 Less : Depreciation 1.47 Net Block 0.24 Capital Work in Progress 0.15 INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.41 Sundry Debtors 0.01 Cash & Bank Balance 0.03 Loans & Advances 4.95

TOTAL 5.40 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 45.30 Provisions 0.02

TOTAL 45.32 NET CURRENT ASSETS : (39.92)


TOTAL 0.53





2006.

a. Secured Loan

PARTICULARS Rs. in Crore Cash Credit from Rahika Central cooperative bank, Madhubani 0.51



b. Cane Growers Dues




c. Electricity Dues





d. Labour Dues


under:



follows:

PARTICULARS Rs. in Crores Statutory deduction 1.56 Contractors 0.01 Liability for expenses 10.91 Creditor for goods supplied 0.97 Other liabilities 27.11

TOTAL 40.56



Liability Profile

General Labour Rs. in crores Basic Wages 8.80 PF incl. interest 1.39 Gratuity 0.04 Bonus 0.72 Retention Allowance 1.72 Total 12.67 Exit Scheme for all Employees 1.70 Net Dues including Exit Scheme 14.37




Based on the technical assessment, the Lohat unit has available infrastructure to

enable it to be expanded to 2500 TCD along with a 60 KLPD Distillery and 12

MW Co-generation Power Plant. The expansion process would require an

implementation period of about 16-18 months. In this connection it may be

mentioned that a sugar mill is expected to have a minimum economic size of

2500 TCD. Hence it can be inferred that the unit is viable with above proposed

expansion. However, to revive the unit, sugarcane an appropriate command area

would required to be notified and necessary support from GOB would be

needed.










Considering the revival possibility with expansion to 2500 TPD alongwith 60

KLPD Distillery and a 12 MW Co Generation Plant, an incremental cost of Rs.164

crores would be required, if some of the usable machineries of the existing mill

are refurbished and used. For efficient operation of the unit post-revival, and

considering such additional amount to be invested, it may be worthwhile to

invite private players for running the unit.









b. Cane Growers Dues (Rs.1.10 Cr)







c) Labour Dues (Rs.14.37 Cr)



employees , investors may have the right of appointment. It may be further



Hence an amicable settlement on all the labour issues i.e. Payment of arrears, exit

scheme, etc has to be arrived between the Labour unions and the BSSCL before


already estimated an amount of Rs 1.70 cr in the event of exit scheme is offered to



all its employees. It is desirable that an Exit Policy scheme may be framed





















if any.










8. Litigation Cases

SBICAPS has appointed M/s Alok Agarwal as the Legal consultant to verify the




possibility of the same may not be ruled out.
















Revival Plan.

MOTIPUR

TABLE OF CONTENTS


2. LOCATIONAL MAP : MOTIPUR, DISTRICT- MUZAFFARPUR, BIHAR ............ 3










SBI Capital Markets Ltd. 2 Unit-Motipur

1. Brief Background The Motipur Sugar Unit is located on the National Highway and at a distance of

1 Km. from Motipur Railway Station and 30 Km distance from District Town of

Muzaffarpur of Bihar. The Unit is adjoined by another private sector Sugar

Factory i.e. Chakia Sugar Unit which is at a distance of 20 Km approximately.

The Motipur Sugar Unit with 1219 TCD capacity, was set up in 1933 as Motipur

Sugar Factory; in 1985 it was taken over by Bihar State Sugar Corporation (BSSC)

under Bihar Sugar Undertakings (Acquisition) Ordinance 1977 and Bihar Sugar

Undertakings (Acquisition) Act 1985.

The unit has substantial got substantial area of land (approximately 1363.40

acres), out of which 50 acres of land is being used for Factory Premises, 16 acres

for Colony Premises and 1297.40 acres as Farm Land. After the take over of the

unit by BSSC, the maximum cane was crushed was 7.10 lac quintal in 1988-89

season [assuming the number of crushing days to be 180 days capacity utilization

works out to around 33%]. The unit was operational till 1996-97 but the

management of BSSC took the decision of closure of mills due to continuous

losses.



2. Locational Map : Motipur, District- Muzaffarpur, Bihar

MOTIPUR Sugar Unit






The detailed Technical Report submitted by KSPL has been attached to this

report. A brief snapshot of the technical report is provided below:


Make of Plant consisting of Milling Unit: Crushing capacity 1250 TCD, Boiler Station, Power House, Clarification Section, Boiling House, Effluent treatment Plant

Stork Workspoor, Netherlands

Value of the Usable Plant & Machineries Rs.5.64 Crore Scrap Value of material including spares Rs.2.11 Crore Land Value (Valuation Report enclosed) Rs.47.62 Crore

Land





(Rs. in Crore) Land Details Area ( Acres) Land Value Market Value Factory Premises 50.00 40.00 42.50 Colony premises 16.00 4.80 5.12





Industries Department, the Balance Sheet of the Motipur unit as on March 31,

2006 is as follows:


PARTICULARS 2005-06 Rs. Crore SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 0.06 0.06 LOAN FUND Secured Loan 0.53 Unsecured Loan 1.17 1.70

TOTAL : 1.76 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 1.45 Less : Depreciation 1.27 Net Block 0.18 Capital Work in Progress 0.95 INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.95 Sundry Debtors 0.10 Cash & Bank Balance 0.11 Loans & Advances 11.50

TOTAL : (A) 12.66 Liabilities 50.95 Provisions 1.05


Profit & Loss Account (Dr bal) 39.97 TOTAL : 1.76





2006.

a. Secured Loan

PARTICULARS Rs. in Crore Muzaffarpur Central Co-operative Bank Ltd. 0.43 Sugar Development Fund From Central Govt. 0.10

TOTAL : 0.53



b. Unsecured Loan

Particulars Rs. in Crore Other Loans 0.04 Loan from Govt. of Bihar (Honorable Justice Uday Sinha Committee) 1.13

TOTAL : Rs. 1.17

The unsecured loans were infused at the time of takeover and are currently

outstanding. It has been informed that no interest is being charged on the same.


Rs. Crore Cane Growers 0.74



d. Electricity Dues





e. Labour Dues


under:


Age No. of Labour Above 60 5 50 to 60 35 40 to 50 13 30 to 40 4 Records not available 3 Total 60

Liability Profile (Rs. In crore) General Labour Basic Wages (Factory) 10.71 Basic Wages (Farm) 0.41 Gratuity 2.53 Bonus 1.33 PF (Factory) 2.73 PF (Farm) .10 Overtime 0.08 Retention Allowance 1.75 Total 19.64 Exit Scheme for all Employees 1.20 Total Liabilities including Exit Scheme 20.84





follows:

Particulars Rs. in Crores Creditors for goods supplied 0.44 Statutory deduction 2.44 Other liabilities 0.85 Current a/c with Hqrs. 33.83 Vendor account 3.13 Cane commission (year wise ) 0.08

TOTAL: Rs. 40.77







Based on the technical assessment, the Motipur unit has available infrastructure

to enable it to be expand to 2500 TCD along with a new 12 MW Co-generation

Power Plant and a Distillery of 60 KLPD. The expansion process would require

an implementation period of about 15-18 months. Hence it can be inferred that

the unit is viable with above proposed expansion. However, to revive the unit,

sugarcane an appropriate command area would required to be notified and

necessary support from GOB would be needed.




attached to the factory (app 300 acres out of 1297 acres) and colony premises is

converted to industrial land for doing the expansion of the unit. This shall

provide more land for further expansion of the unit. It is also proposed that the

colony land may be allowed for usage for expansion of unit, if required. The

colony may be shifted to some other location. However in case of further

expansion the allotment of sugarcane command area would also need to be

suitably increased.

Considering the revival possibility with expansion to 2500 TPD with a new 12

MW Co-generation Power Plant and a Distillery of 60 KLPD, an incremental cost

of Rs. 164 crores would be required, if some of the usable machineries of the

existing mill are refurbished and used. For efficient operation of the unit post-

revival, and considering such additional amount to be invested, it may be

worthwhile to invite private players for running the unit.








have to be negotiated and settled by the Department prior to the bid process.The

dues of Muzaffarpur Central Co-operative Bank Ltd as on date has to be

settled/waived and necessary initiative has to be taken by the Sugarcane

Industries Department.





3. Cane Growers Dues (Rs.0.74 Cr)







d) Labour Dues (Rs.20.84 Cr)









Scheme, etc has to be arrived between the Labour unions and the BSSCL before


already estimated an amount of Rs.1.20 cr in the event of Exit Scheme is offered

to all its employees. It is desirable that an Exit Policy scheme may be framed





















if any.










8. Litigation Cases





possibility of the same may not be ruled out.
















Revival Plan.

NEW SIWAN

TABLE OF CONTENTS


2. LOCATIONAL MAP: NEW SIWAN, DISTRICT- SIWAN, BIHAR................... 3




a. Secured Loan ................................................................................................................. 6

b. Details of Unsecured Loans - Nil.................................................................................. 6



e. Labour Dues..................................................................................................................... 7









SBI Capital Markets Ltd. 2 Unit- New Siwan

1. Brief Background The New Siwan Sugar Unit is located 2 km away from nearest Siwan Railway

Station of Siwan District and 3 km away from Siwan Town. The Mill is at a

distance of 3 km from approach road of National Highway. The Unit is

adjoined by Siwan Sugar Unit which is at a distance of 3 km approximately.

The New Siwan Sugar Unit with 935 TCD capacity, was incorporated in 1918

under the ownership of New Savan Sugar & Gur Refining Company. After 61

years of its operation i.e. in 1979 it was taken over by Bihar State Sugar

Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977.

The BSSC was incorporated as a wholly owned Government Company in

December 1974 without having its own Sugar Mills.

The unit has only 28.30 acres of land as Factory Premises and they do not

have any other land to be used as Colony, Farm Land or Out Centre Land. It

has a huge Sugarcane Area of land of approximately 36173 acres.


1981-82 (7.61 lac quintal). The unit was operational till 1990-91 but the

management of BSSC took the decision of closure of mills due to poor cash

management and continuous losses due to non-disposal of sugar & molasses

etc.



2. Locational Map: New Siwan, District- Siwan, Bihar

New Siwan Sugar Unit










Make of Plant consisting of - Mill Unit, Boiler

Station, Power House, Boiling House

Not Known

Scrap Value of material including spares Rs 0.64 Crore


Land





Land Details Area ( Acres) Value (Rs. Crore) Factory Premises & Colony premises

28.30 37.35





Industries Department, the Balance Sheet of the New Siwan unit as on March



Amount (Rs. crores)

PARTICULARS 2006 Rs. in Crores

SOURCES OF FUND : SHAREHOLDERS FUND : Capital Reserve & Surplus LOAN FUND : Secured Loan 0.08 Unsecured Loan 0.08

TOTAL : RS. 0.08 APPLICATION OF FUND : FIXED ASSETS Gross Block 3.65 Less : Depreciation 3.52 Net Block 0.13 Capital work in progress 0.06 CURRENT ASSETS, LOANS & ADVANCES : Inventory 0.54 Sundry Debtors Cash & Bank Balances 0.05 Loans & Advances 2.41

3.00 LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities 31.66 Net Current Assets (28.66) Suspense Account (0.46) Miscelleneous Expenses (to the extent not written off or adjusted) Profit and Loss Account 29.01 Net Current Assets

TOTAL : RS. 0.08 0.08





2006 submitted by BSSC.


Sugar Development Fund 0.08 TOTAL : 0.08

The above dues are based on the Internal Audit report as on March 31, 2006

submitted by BSSC It may be mentioned that these claimants may have some

charge on the existing assets of the unit for their respective dues.

The SID may further require to confirm that there is no other liability other

than shown in the Internal Audit Report as on March 31, 2006.

b. Details of Unsecured Loans - Nil


Cane Growers 0.04





Electricity Nil




e. Labour Dues





follows:

PARTICULARS 2006 Current A/c HO, Patna 12.26 Statutory Deduction 0.45 Inter Unit Transaction 0.03 Other current liabilities 6.48

TOTAL: 19.22 The details of interunit transaction and current account with headquaters has

not been verified.



Liability Profile General Labour Rs. in crores Basic Wages 3.38 PF incl interest 0.21 Other O/s Allowance 0.29 Gratuity 0.95 Bonus 0.55 Total 5.38 Exit Scheme-considering All Employees 0.75 Net Dues including Exit Scheme settlement

6.13









generation unit and distillery. In light of above, the broad reasons for the New

Siwan unit being unviable is as under:

1. The factory falls in the town area of Siwan.

2. Transportation of Cane and Sugar to and from the unit may be

difficult.

3. The Land is not enough for further expansion.








3. Handicraft Park


5. Hospitals, Schools



indicated above.



















The unit may not be revived due to difficulties envisaged and noted above.

Therefore the same has to be developed for other industrial purpose some of

which has been mentioned above. However the liabilities for existing dues

has to be satisfied.

a. Secured Loans (Rs. 0.08 Cr.) It may be mentioned that to transfer the land to the potential investors free

from encumbrances and free of charge on the assets, NOC from the existing

lenders has to be obtained. However the investors would not be willing to

take this liability. Considering the same, the above liabilities have to be

negotiated and settled by the Department prior to the bid process.

b. Un-Secured Loans (Nil) As per the information provided to us, there are no unsecured loans as on

date.

c. Cane Growers Dues (Nil) As per the information provided by the Department, as on May 2007, all the






d. Labour Dues (Rs. 6.13 Cr) As indicated above, even if the unit is unviable from Sugar perspective, it








Policy scheme has to be framed preferably by engaging the HR consultants so

that the total amount under this scheme shall not exceed the actual amount

overdue as calculated above and furnished by BSSC in their internal report for

the unit. The payment of compensation structure to labour may be structured

in installment basis that would be paid over a minimum period.

e. Other Liabilities (Rs 19.22 Crore) All other liabilities (including contingent liabilities), but not limited to Sales




waived by the GoB.


















Bihar.






9. Litigation Cases












operation phase, the Government may assist in the settlement of cases.








for sugar unit. Therefore we suggest SID, GoB to consider the rehabilitation

scheme as suggested in the proposed Revival Plan.

TABLE OF CONTENTS


2. LOCATIONAL MAP: RYAM, DISTRICT- DARBHANGA, BIHAR.................. 3




a. Secured Loan ................................................................................................................. 6




e. Labour Dues..................................................................................................................... 7



6. ALTERNATE STRATEGY.......................................................................................10






SBI Capital Markets Ltd. 2 Unit- Ryam

1. Brief Background The Ryam Sugar Unit is located at about 20 km from the railway station of

Tarsarai and 25 km from Darbhanga District Township. The nearest sugar

factory is a BSSC unit - Sakri, which is about 20 km from this Unit.

The Ryam Sugar Unit with 808 TCD capacity was incorporated in 1914 under

the banner of M/s. Tirhut Co-operative Sugar Co. Ltd. After 64 years of its


(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts. 1977.

The unit has only 8.10 acres of land which is being used for Factory Premises.

Colony Premises has 17.92 acres of land. The Unit possesses a Sugarcane Area

of land of approximately 28000 acres.


1978-79 that was 6.04 Lac quintal. The unit was operational till 1993-94 but the

management of BSSC took the decision of closure of mills due to poor cash

management and continuous losses.



2. Locational Map: Ryam, District- Darbhanga, Bihar

Ryam Sugar Unit



3. Technical Snapshot SBI Capital Markets Ltd. appointed K. S. Projects & Process Engineers Private




snapshot of the technical report is provided below:


Make of Plant consisting of - Mill Unit, Boiler Station, Power House, Boiling House and Clarification House

Mirless Watson Co. Ltd

Scrap Value of material including spares Rs. 4.13 Cr Land Value (valuation report enclosed) Rs. 4.22 Cr Land






26.02 4.22





Industries Department, the Balance Sheet of the Ryam unit as on March 31,

2006 is as follows:


Amount (Rs. crores)

PARTICULARS 2006 RS.

SOURCES OF FUND : SHAREHOLDERS FUND : Capital Reserve & Surplus 0.04 LOAN FUND : Unsecured Loan 1.10

TOTAL : RS. 1.14 APPLICATION OF FUND : FIXED ASSETS Gross Block 0.23 Less : Depreciation Net Block 0.23 Capital work in progress CURRENT ASSETS, LOANS & ADVANCES : Inventory 0.60 Sundry Debtors 0.01 Cash & Bank Balances 0.09 Loans & Advances 0.79

TOTAL: RS. 1.49 LESS : CURRENT LIABILITIES AND PROVISIONS Liabilities 26.44 Net Current Assets (24.95) Miscellaneous Expenses (to the extent not written off or adjusted) Profit and Loss Account 25.86

TOTAL: RS. 1.14




The detailed break up of liabilities is as follows:

a. Secured Loan Rs. Crore

Secured Loans Nil




PARTICULARS

Loan From Govt. of Bihar 0.71

Interest Accrued & Due on Govt. Loan 0.39

Total 1.10

As per the internal report prepared by BSSC, the above loan pertains to march

31, 2006. The same were infused at the time of takeover and are currently

outstanding. It has been informed that no interest is being charged on the

same.

c. Cane Growers Dues Rs. Crore

Cane Growers Dues Nil

It has been informed by SID that as on May 2007 there is no such O/s

dues to the cane growers and all the dues under the above head has

been settled/ in the process of settlement.


Electricity Nil




e. Labour Dues As far as the records are available from their Internal Audit Report for the

financial year 2001-2002, an amount of Rs. 5.75 crore is still due to all the

employees consisting of 44 Permanent Employees. However, we have been

furnished the latest labour dues position which is as under:


SID and further information collected from the unit.



General Labour Amount Basic Wages 4.60 PF incl. Interest 1.25 Adhikal 0.03 Bonus 0.08 Upadhan 1.48 Retention Allowance 0.07 Leave Encashment 0.04 Total 7.55 Exit Settlement Scheme 0.85 Total Payable including Exit Scheme 8.40





follows:

Rs. Crore

Particulars Amount Liabilities for Expenses 3.95 Statutory Deductions 1.16 Inter unit Account 0.09 Current Account with H.O. 16.88 Bihar Govt. through High Court Patna 2.23

TOTAL: RS. 24.31

As per the internal report prepared by BSSC, the above loans pertain to March

31, 2006. The same were infused at the time of takeover and are currently

outstanding. It has been informed that no interest is being charged on the

same.






felt that the unit has small area of land and thereby it may be difficult to

revive the same. In this connection, it may be mentioned that given the

prevailing sugar industry parameters, sugar units are surviving mainly

because of integrated Co-generation unit and distillery. In light of above, the

broad reasons for the Ryam unit being unviable is as under:

1. The factory is a very old plant and with a small piece of land that it has,

cannot be used for any sort of expansion/ modernization and there for

is unviable.

2. The unit is very near to Lohat where there is a possibility of revival and

therefore Cane may not be sufficient for this unit.

However in case the investors are not interested in Lohat, Ryam may be made viable.




In the present context, it is felt that the space should be best utilized for

Commercial Activity and not industrial activity viz.

1. Handicraft Park


3. Hospital

4. Dairy



indicated above.














to the prospective investor. Liabilities etc. would need to be settled

accordingly to generate the investors’ interest.




a. Secured Loans (Nil)

As per the Internal Audit Report, there are no dues under this head. However

in case of due of similar nature, the same has to be negotiated and settled by

the Department prior to the bid process.

b. Unsecured Loans (Rs. 1.10 Cr)

The unsecured loans are from Government of Bihar and it is proposed that

GoB may consider waiving it in the larger interest.

c. Cane Growers Dues (Nil)




















in installment basis that would be paid over a minimum period.

e. Other Liabilities (Rs 24.31 Crore)





waived by the GoB.






On realization of the reserve price from the investors, the same may be




2. Payment of Dues to Banks and Financial Institutions including

SDF loan, if any.

3. Any liability payable by an order of Court.





payments.



Dues, and tax arrears may be waived/settled by the GoB.



9. Litigation Cases





the following case is pending before a court:

1. Money Suit No. 1/2006, (Food Corporation of India Vs. BSSC, Ryam)

for refund of excess payment with respect to Sugar.














arrived to a conclusion that the unit may not be revived since the nearby unit

Lohat has better potential of revival. However in case Lohat is not being

revived, the possibility of revival of this unit may be explored. Therefore we


Revival Plan.

TABLE OF CONTENTS


2. LOCATIONAL MAP: SAKRI, DISTRICT- MADHUBANI, BIHAR .................. 3




a. Secured Loan ................................................................................................................. 6

b. Details of Unsecured Loans - Nil.................................................................................. 6



e. Labour Dues..................................................................................................................... 7

e. Other Liabilities............................................................................................................... 7








SBI Capital Markets Ltd. 2 Unit- Sakri

1. Brief Background The Sakri Sugar Unit is located 500 m away from Sakri Railway Station and 25

Km. away from District Town Madhubani. The Unit is 1.5 km away from

National Highway approach road of Darbhanga. The Unit is adjoined by

another two BSSC owned closed down Sugar Units i.e. Ryam Sugar Unit (20

km) and Lohat Sugar Unit (15 km).

The Sakri Sugar Unit with 762 TCD capacity, was incorporated in 1933 under

the ownership of Darbhanga Maharaj as Darbhanga Sugar Co. Limited, later

on after 44 years of its operation i.e. in 1977 it was taken over by Bihar State

Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts

1977. The BSSC was incorporated as a wholly owned Government Company

in December 1974 without having its own Sugar Mills.



2. Locational Map: Sakri, District- Madhubani, Bihar

Sakri Sugar Unit






The detailed Technical Report submitted by KSPL has enclosed. A brief of the

technical report is provided below:


Make of Plant consisting of - Milling Unit, Boiler Station, Power House, Boiling House, Clarification House, Grading Section and Effluent Treatment Plant

Mirless Watson

Scrap Value of material including spares Rs 4.26 Crore Land Value (valuation report enclosed) Rs 13.94 Crore

Land






32.23 13.94





Industries Department, the Balance Sheet of the Sakri unit as on March 31,

2006 is as follows:


Amount (Rs. crores)

PARTICULARS 2006 SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus LOAN FUND : Secured Loan 0.21 Unsecured Loan

TOTAL : RS. 0.21 APPLICATION OF FUND : FIXED ASSETS : Gross Block 1.71 Less : depreciation 1.49 Net Block 0.21 Capital work in progress CURRENT ASSETS, LOANS & ADVANCES : Inventories 0.46 Sundry Debtors 0.05 Cash & Bank Balance 0 Loans & Advances 3.23

TOTAL : RS. 3.74 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 33.39 Provision 0.77 Net Current Assets (30.42) Miscellaneous Expenditures (To the extent not written off or adjusted) Profit and Loss Account 30.42

TOTAL : RS. 0.21




The detailed breaks of liabilities are as follows:


R.C.C Bank 0.21 TOTAL : 0.21

The above dues are based on the Internal Audit report as on March 31, 2006

submitted by BSSCL It may be mentioned that these claimants may have

some charge on the existing assets of the unit for their respective dues.

The SID may further confirm that there is no other liability other than shown

in the Internal Audit Report as on March 31, 2006.

b. Details of Unsecured Loans - Nil


Cane Growers 0.98





Electricity Nil




e. Labour Dues We have collected the latest age profile and dues position which is as under:




e. Other Liabilities The break up of other liabilities appearing in the internal audit report are as

follows:

PARTICULARS 2006 Current A/c with H.O (Capital) 20.12 Statutory deduction 2.91 Inter Unit Transaction 0.04 Other current liabilities 8.26

TOTAL 31.33




2006.



Liability Profile General Labour Rs. in crores Basic Wages 5.21 Leave Encashment 1.10 PF incl interest 2.51 Total 8.82 Exit Scheme-considering All Employees 1.02 Net Dues including Exit Scheme settlement

9.84










Sakri unit being unviable is as under:



TCPD, however the crushing unit of this size would need a 90 KLPD



4. The unit is very close to Lohat and Ryam unit which is at a distance of

approximately 15-20 km.








3. Handicraft Park




indicated above.



















The unit may not be revived due to difficulties envisaged and noted above.

Therefore the same has to be developed for other industrial purpose some of

which has been mentioned above. However the liabilities for existing dues

has to be satisfied.


It may be mentioned that to transfer the land to the potential investors free





b. Cane Growers Dues (Rs. 0.98 Cr)







c. Labour Dues (Rs.9.84 Cr)











overdue as calculated above and furnished by BSSCL in their internal report

for the unit. The payment of compensation structure to labour may be

structured in installment basis that would be paid over a minimum period.

d. Other Liabilities (Rs 31.33 Cr)





waived by the GoB.











SDF loan, if any.






payments.






9. Litigation Cases



1. As per the information provided by the legal advisor, there is no

pending suits/cases for recovery of compensation by the erstwhile

owner.















for sugar unit. Therefore we suggest SID, GoB to consider the revival scheme

as suggested in the proposed Revival Plan.

SAMASTIPUR

TABLE OF CONTENTS


2. LOCATIONAL MAP: SAMASTIPUR, DISTRICT- SAMASTIPUR, BIHAR..... 3




a. Secured Loan ................................................................................................................. 6




e. Labour Dues..................................................................................................................... 7








Private & Confidential Rehabilitation Report

SBI Capital Markets Ltd. 2 Unit- Samastipur

1. Brief Background The Samastipur Sugar Unit is located in Samastipur Town itself which is

approximately 200 m from National Highway and 1 km from Samastipur

Railway Station. The Unit is adjoined by another private sector Sugar Factory

i.e. Hasanpur Sugar Unit.

The Samastipur Sugar Unit with 808 TCD capacity was incorporated in 1920

under the banner of M/s. Sastipur Sugar Central Sugar Limited; later on after

57 years of its operation i.e. in 1977 it was taken over by Bihar State Sugar

Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1977.

The unit has only 20.90 acres of land which is being used for Factory Premises

and Colony Premises which actually falls in the town of Samastipur. The Unit

possesses a Sugarcane Area of land of approximately 11814 acres.


1982-83 that was 7.63 lakh quintal in 1982-83 season [i.e. around 52% capacity

utilisation. The unit was operational till 1996-97 but the management of BSSC

took the decision of closure of mills due to poor cash management and

continuous losses.



2. Locational Map: Samastipur, District- Samastipur, Bihar

Samastipur Sugar Unit








Crushing Capacity and Unit Value 808 TCD

Make of Plant consisting of - Mill Unit, Boiler Station, Power House, Boiling House

Mirless Watson Co. Ltd, George Fletcher, Babcok

& Wilcok Scrap Value of material including spares (Report Provided in Annexure I)

Rs 3.80 Crore


Land






20.90 22.99




As per the Internal Audit Report made available to us by the Cane

Development Department, the Balance Sheet of the Samastipur unit as on

March 31, 2006 is as follows:


Amount (Rs. crores) PARTICULARS 2006

SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 0.03 0.03 LOAN FUND Secured Loan 1.01 Unsecured Loan 1.97 2.98

TOTAL : Rs. 3.01 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block 1.78 Less : Depreciation 1.60 Net Block 0.18 Capital Work in Progress 0.04 INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.47 Sundry Debtors 0.03 Cash & Bank Balance 0.01 Loans & Advances 5.07

TOTAL : (A) 5.58 LESS : CURRENT LIABILITIES & PROVISIONS Liabilities 39.03 Provisions 1.37

TOTAL : (B) 40.4

NET CURRENT ASSETS : (A-B) -34.82 Unreconciled amount 0.404 a)Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss Account 37.21

TOTAL :Rs. 3.01




The detailed break up of liabilities is as follows:


Secured Loan 1.01 TOTAL : 1.01

The further break up of secured loans was not available. The above dues are

based on the Internal Audit report as on March 31, 2006 submitted by BSSC. It

may be mentioned that these claimants may have some charge on the existing


The Sugarcane Industries Department (SID) may further require to confirm

that there is no other liability other than shown in the Internal Audit Report

as on March 31, 2006.


Unsecured Loans 1.97

The further break up of unsecured loans was not available. As per the internal

report prepared by BSSC, the above loan pertains to march 31, 2006. The same

were infused at the time of takeover and are currently outstanding. It has

been informed that no interest is being charged on the same.

c. Cane Growers Dues Rs. Crore

Cane Growers Nil





Electricity Nil




e. Labour Dues Based on the Internal Audit Report for the financial year 2001-2002, an


collected the latest age profile and dues position which is as under:


SID and further information collected from the unit.

We have prepared the above details and O/s dues based on the information

submitted by them.


follows:

PARTICULARS 2006 Other Current Liabilities 28.27

TOTAL 28.27

The detailed break up of the above is not available presently.



Liability Profile General Labour Rs. in crores Basic Wages 6.83 PF incl interest 1.88 Upadhan 2.00 Retention Allowance 0.77 PF on RA 0.18 Total 11.66 Exit Scheme-considering All Employees 0.90 Net Dues including Exit Scheme settlement

12.56



5. Assessment of the unit







Samastipur unit being unviable is as under:


TCPD, however the crushing unit of this size would need a 90 KLPD


2. Further, the unit is located in the heart of the town and given the

pollutants being emitted by the distillery it would not be advisable to

set up a distillery unit in the midst of the township.




Samastipur is a junction town well linked to other parts of the country

through railways. The town is populated and there is dearth of space. In view

of the above, in the present context, it is highly felt that the space should be

best utilized for Commercial Activity and not industrial activity viz.

1. Handicraft Park


3. Hospital

4. Setting up of world class ‘B’ / Engineering schools etc. on the lines of

IIT Kharagpur/ BITs Pilani/ IIM (Indore) etc. with independent

management.



indicated above.














to the prospective investor. Liabilities etc. would need to be settled

accordingly to generate the investors’ interest.




As indicated above, even if the unit is unviable from the perspective of

operating it as sugar unit but it is felt that interest of the investors could be

invited for taking up commercial activity. Accordingly, the liabilities as

indicated above would need to be settled. The liabilities may be settled as

follows:

a. Secured Loans (Rs. 1.01 Cr.)

It may be mentioned that to transfer the land to the potential investors free





b. Unsecured Loan (Rs. 1.97 Cr)

The unsecured loans are from Government of Bihar and it is proposed that

GoB may consider waiving it in the larger interest.

c. Cane Growers Dues (Nil)
























etc that may be claimed/accrued in future may be settled/negotiated/

waived by the GoB.











SDF loan, if any.






payments.






9. Litigation Cases





















scheme as suggested in the proposed Plan.

TABLE OF CONTENTS


2. LOCATIONAL MAP: SIWAN, DISTRICT- SIWAN, BIHAR ............................. 3




a. Secured Loan ................................................................................................................... 6




e. Labour Dues..................................................................................................................... 7



6. ALTERNATE STRATEGY.......................................................................................10


8. UTILISATION OF PROCEEDS IN THE SETTLEMENT PROCESS..................13




SBI Capital Markets Ltd. 2 Unit- Siwan

1. Brief Background The Siwan Sugar Unit is located on the National Highway and 3 km from

Sugauli Railway Station keeping 3 km distance from District Town of Siwan

of Bihar. The Unit is adjoined by another closed down Sugar Unit i.e. New

Siwan Sugar Unit which is at a distance of 3 km approximately.

The Siwan Sugar Unit with 800 TCD capacity, was incorporated in 1932 under

the banner of M/s. S.K.G. Sugar Limited; later on after 53 years of its


(BSSC) under Bihar Sugar Undertakings (Acquisition) Acts 1985. The BSSC

was incorporated as a wholly owned Government Company in December

1974 without having its own Sugar Mills.

The unit has land area of approximately 32.58 acres, out of which 21.48 acres

of land is being used for Factory Premises, 8.90 acres for Colony Premises.

Moreover, 2.20 acres of land covering Pond, Temple & Pancing is there as Out

Center Land. The unit is also having a Sugarcane Area of land of 32000 acres.


1977-78 that was 9.58 lac quintal in 1977-78 season. The unit was operational

till 1992-93 but the management of BSSC took the decision of closure of mills

due to poor cash management and continuous losses.



2. Locational Map: Siwan, District- Siwan, Bihar

Siwan Sugar Unit










Make of Plant consisting of - Mill Unit, Boiler Station, Power House, Boiling House

Mirless Watson Co. Ltd.-ScotLand

Scrap Value of material including spares Rs 2.60 Cr Land Value (valuation report enclosed) Rs. 37.19 Cr

Land






30.38 37.19





Industries Department, the Balance Sheet of Siwan unit as on March 31, 2006

is as follows:


Amount (Rs. crores)

PARTICULARS Amount

2005-06

SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus LOANS - FUND: Secured Loan Un - secured Loan 0.20

TOTAL : Rs. 0.20 APPLICATION OF FUND: FIXED ASSETS: Gross Block 0.63 Less : Depreciation 0.51 Net Block 0.12 Capital Work -In –Progress INVESTMENTS: CURRENT ASSETS, LOANS & ADVANCES Inventories 0.35 Sundry Debtors Cash & Bank Balance 0.01 Loans & Advances 2.15

TOTAL : RS. 2.50 LESS: CURRENT LIABILITIES & PROVISIONS Liabilities 20.20 Provisions 0.35 NET CURRENT ASSETS (18.05) a) Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss account 18.13

TOTAL : Rs. 0.20





2006 submitted by BSSCL.

a. Secured Loan

Secured Loan Nil

b. Unsecured Loans

PARTICULARS Rs Crore Government of Bihar 0.20

TOTAL : 0.20


Cane Growers 0.05

d. Electricity Dues

Rs. Crore Electricity 0.11



e. Labour Dues Based on the Internal Audit Report for the financial year 2001-2002, an


collected the latest age profile and dues position which is as under:


CDD and further information collected from the unit. We have prepared the




Liability Profile General Labour Rs. in crores Basic Wages 4.87 PF 2.26 Bonus 0.61 Upadhan 1.59 Misc 0.05 Retention Allowance 0.06 Total 9.98 Exit Scheme-considering All Employees 0.27 Net Dues including Exit Scheme settlement

10.25




follows:

PARTICULARS in Rs. Cr Credit for goods supplers 0.34 Liabilities for expenses 0.31 Statutory Deduction 1.27 Other Liabilities 3.71 Current Account with H.O. 12.85 Cane Commission 0.02 Gratuity 1.43 Bonus 0.47

TOTAL 20.40




2006.










Siwan unit being unviable are as under:

1. Thus the revival of the sugar unit is not possible due to the following

reasons:



4. The unit is very close to New Siwan unit which is at a distance of

approximately 3 km.








3. Handicraft Park


5. Educational Institute

6. Hospital



indicated above.



















a. Secured Loans (Nil)

b. Unsecured Loans (Rs. 0.20 Cr)

The unsecured loans are from Government of Bihar. Under the current stage



















installment basis.



e. Other Liabilities (Rs 20.40 Crore)





waived by the GoB. The other liabilities also include current account with

Head office of Rs. 21.92 crores which has been infused as capital.











SDF loan, if any.






payments.






9. Litigation Cases





the following cases are pending before various courts:

Before the Hon’ble High Court, Patna

1. C.W.J.C. No. 5784 of 2006 (Makmul Hoda Vs. The State of Bihar & ors.)

(Matters relates to Retirement Benefits and for payment of other dues)

Before the Civil Court & Other Court

1. Title Suit No. 6 of 2000 (General Manager, Bihar State Sugar

Corporation Ltd. Vs. Dr. Haroon and others)

2. Certificate Case No. 2 of 1994 (Bihar Electricity Board, Chapra Vs.

General Manager, Bihar State Sugar Corp. Ltd., Siwan)

3. M.S. No. 12 of 1993 (Central Excise Vs. General Manager, Bihar State

Sugar Corp. Ltd, Siwan)
















scheme as suggested in the proposed Plan.

SUGAULI

TABLE OF CONTENTS


2. LOCATIONAL MAP : SUGAULI, DISTRICT- EAST CHAMPARAN, BIHAR ..... 3










SBI Capital Markets Ltd. 2 Unit- Sugauli

1. Brief Background The Sugauli Sugar Unit is located at 1 Km. from National Highway and 5 Kms.

from Sugauli Railway Station and around 25 Km from District Town of East

Champaran District of Bihar. There are two private sugar units viz. Majhaulia

Sugar Unit (15 Km) and Motihari Sugar Unit (25 Km) located close to the Sugauli

unit.

The Sugauli Sugar Unit with 900 TCD capacity, was incorporated in 1933 in the

name of M/s. Sugauli Sugar Works Limited. It was taken over in 1985 by Bihar

State Sugar Corporation (BSSC) under Bihar Sugar Undertakings (Acquisition)

Acts. 1985. The BSSC was incorporated as a wholly owned Government

Company in December 1974.

The unit has substantial land approximately 430.77 acres. Out of which 73.13

acres of land is being used for Factory Premises, 16.24 acres for Colony Premises

and 319.64 acres of land for its Agricultural use.

After take over of the unit by BSSC, the maximum cane of 9.19 lakh quintal was

crushed in the year 1991-92 (Assuming the no. of crushing days as 180 days,



continuous losses.



2. Locational Map : Sugauli, District- East Champaran, Bihar

Sugauli Sugar Unit






detailed Technical Report submitted by KSPL has been provided in this report. A




Milling Unit: M/s Krupp Megdeberg, Germany

Realisable value of the Mill House, Boiling house equipments and other spares

Rs 1.22 Crore

Land Value (valuation report enclosed) Rs. 44.18 Crore Land





(Rs. in Crore) Land Details Area ( Acres) Govt. Value Market Value Factory and colony Premises

89.37 41.82 44.18





Industries Department, the Balance Sheet of Sugauli unit as on March 31, 2006 is

as follows:


Amount (Rs. crores)

PARTICULARS Amount

2005-06

SOURCES OF FUND: SHAREHOLDERS FUND: Capital 0.01 Reserve & Surplus LOANS - FUND: Secured Loan 0.75 Un - secured Loan

TOTAL : Rs. 0.75 APPLICATION OF FUND: FIXED ASSETS: Gross Block 1.51 Less : Depreciation 1.37 Net Block 0.14 Capital Work -In –Progress 0.03 INVESTMENTS: CURRENT ASSETS, LOANS & ADVANCES Inventories 0.55 Sundry Debtors 0.17 Cash & Bank Balance 0.06 Loans & Advances 3.08

TOTAL : RS. 3.86 LESS: CURRENT LIABILITIES & PROVISIONS Liabilities 33.22 Provisions 0.81 NET CURRENT ASSETS (30.17) a) Miscellaneous Expenditure to the extent not written off or adjusted Profit & Loss account 30.75

TOTAL : Rs. 0.75





2006.

a. Secured Loan

PARTICULARS Rs Crore Bihar State Cooperative Bank Ltd 0.73 Sugar Development Fund 0.02

TOTAL : 0.75



b. Cane Growers Dues Rs Crore

Cane Growers 1.03



c. Electricity Dues Rs. Crore

Electricity Nil




d. Labour Dues The labour dues position based on the information submitted by the unit is as

under:

e. Other Liabilities The break up of other liabilities appearing in the internal audit report are as

follows:

PARTICULARS 2006 Statutory deduction 1.97 Liability for expenses 6.58 Creditor for goods supplied 0.10 Current A/c with H.O (Capital) 21.93 Other Liabilities 0.02

TOTAL 30.60 The details of interunit transaction and current account with headquaters has not

been verified. The SID may further require to confirm that there is no other




Liability Profile General Labour Rs. in crores Basic Wages 4.02 PF incl interest 1.51 Other O/s Allowance 1.35 Gratuity 0.42 Bonus 0.72 Total 7.31 Exit Scheme- Amount considering All Employees 1.82 Net Dues including Exit Scheme 9.13




The Unit located in East Champaran district with a land area of 89 acres and

farm land area of around 319 acres. The unit can be expended to 1500 TPD with a

distillery based on juice along with a cogen of 7 MW. For this a boiler, TG set and

a distillery shall have to be installed. Complete plant shall be converted to an

electric driven plant and mills shall have to be relocated and driven by

individual drives and provided with rake type inter carriers, Donnelley chutes

etc. Remaining equipment except some can be disposed off. The distillery

capacity shall be 90 KLPD. The expansion process would require an

implementation period of about 15-18 months. Hence it can be inferred that the

unit is viable with above proposed expansion. The incremental cost has been

estimated at around Rs. 140 crores.

Suitable cane growing area may be allocated to take care of the units

requirement.

The farm land of 200 acres may also be given alongwith the transfer of unit. The

colony land may be allowed to be converted into factory land for immediate or

future expansions. The adjacent farm land, if any, may be allowed to be used as

factory land.








expansion of the unit. It is also proposed that the factory colony may be allowed

for usage for expansion of unit. The colony may be shifted to some other

location, preferably the nearest farm land subject to necessary approvals.

However in case of further expansion the allotment of sugarcane command area

would also need to be suitably increased.








a. Secured Loans (Rs.0.75 Cr.) It may be mentioned that the unit would need to be transferred to the potential




b. Cane Growers Dues (Rs.1.03 Cr) As per the information provided by the Department, as on May 2007, all the






c) Labour Dues (Rs.9.13 Cr) As per the discussions and feedback received from various investors, they would

not like to takeover the unit along with any obligation (including the labour

liability) and with regard to appointment of existing employees, investors may

have the right of appointment. It may further be mentioned that the new investor

would be averse to recruiting the existing labour based on their own screening

process.

Hence an amicable settlement on all the labour issues i.e. Payment of past

arrears, Exit Scheme, Settlement, etc has to be arrived between the Labour unions

and the BSSC before transferring the unit to the new investor. It may be

mentioned that BSSC has already estimated an amount of Rs 1.70 crore in the

event of Settlement scheme (Exit Scheme) is offered to all its employees. It is



desirable that an Exit Policy scheme may be framed preferably by engaging the

HR consultants.





d. Other Liabilities (Rs.30.60 Crore) All other liabilities (including contingent liabilities), but not limited to Sales Tax,



claimed/accrued in future has to be settled/negotiated/ waived by the GoB. The

other liabilities also include current account with Head office of Rs. 21.92 crores

which has been infused as capital.










2. Payment of Dues to Banks and Financial Institutions including SDF

loan, if any.








and tax arrears may be waived/settled by the GoB.



8. Litigation Cases



As per the findings of the Legal Advisor and as mentioned in the report, there

are no litigation cases against the above Mill as on date.


opined that the BSSC has marketable Title over the property.




been made as per the above scheme) and due to reasons of the above litigation,

and if the implementation of the construction cannot be progressed during the


Government may undertake to make good the losses suffered if any.









Revival Plan.

WARSALIGANJ

TABLE OF CONTENTS


2. LOCATIONAL MAP : WARSALIGANJ, DISTRICT- NAWADA, BIHAR............. 3










SBI Capital Markets Ltd. 2 Unit- Warsaliganj

1. Brief Background

The Warisaliganj Sugar Unit is located 2 Km away from Warisaliganj Railway

Station of Nawada District, 20 Km away from District Town and 20 Km distance

from National Highway approach road on Nawada-Barbigha Road. No other

Sugar Unit is located near this Unit.

The Warisaliganj Sugar Unit with 700 TCD capacity, was incorporated in 1933

under the ownership of Warisaliganj Co-operative Sugar Mills i.e. in the year

1977 it was taken over by Bihar State Sugar Corporation (BSSC) under Bihar

Sugar Undertakings (Acquisition) Acts. 1977. The BSSC was incorporated as a

wholly owned Government Company in December 1974.

The unit has a substantial land of 37.90 acres, out of which 32.85 acres of land is

being used for Factory Premises and 5.05 acres of land as Colony Premises.





continuous losses.



2. Locational Map : Warsaliganj, District- Nawada, Bihar

Warsaliganj Sugar Unit







detailed Technical Report submitted by KSPL has been provided in this report. A



Make of Plant consisting of Milling Unit: Crushing capacity 661 TCD, Boiler Station, Power House, Clarification Section Boiling House, Centrifugal and Grading Section

M/s. Duncon Stewert & Co. Glassgow

Scrap Value of material including Spares Rs.2.39 crore Land Value (valuation report enclosed) Rs. 14.15 crore

Land





(Rs. in lacs) Land Details Area ( Acres) Govt. Value Market Value Factory and colony Premises

37.90 12.56 14.15





Industries Department, the Balance Sheet of the Warisaliganj unit as on March



PARTICULARS 2006 Total Rs. In Crores Rs. In Crores

SOURCES OF FUND: SHAREHOLDERS FUND: Capital Reserve & Surplus 9.00 9.00 LOAN FUND Secured Loan 0.23 Unsecured Loan 0.84 1.07

TOTAL : Rs. 10.07 APPLICATION OF FUNDS: FIXED ASSETS: Gross Block Less : Depreciation Net Block 9.01 Capital Work in Progress INVESTMENTS : CURRENT ASSET , LOANS & ADVANCES Inventories 0.42 Sundry Debtors 0.10 Cash & Bank Balance 0.10 Loans & Advances 0.73

TOTAL : RS. 1.35 LESS : CURRENT LIABILITIES & PROVISIONS Current Liabilities 0.64 Outstanding Liabilities 3.53 Other Liabilities 11.00 Provisions 1.47

TOTAL : RS. 16.64 NET CURRENT ASSETS : (15.29)


TOTAL :Rs. 10.07





2006.

a. Secured Loan

PARTICULARS Rs Crore N.C.C Bank CC Account 0.23



b. Unsecured Loan

Particulars Rs Crore Loan from Govt. of Bihar 0.65 Interest Accrued & Due on Loan Govt. of Bihar 0.19

TOTAL : Rs. 0.84

The loan was infused at the time of takeover and are currently outstanding. It has

been informed that no interest is being charged on the same.





d. Electricity Dues





e. Labour Dues


under:


Age No of Labour Above 60 1 50 to 60 28 40 to 50 2 Total 31



follows:

(Rs. In Crores) Particulars Amount Other liabilities 0.02

TOTAL: Rs. 0.02

The details of interunit transaction and current account with headquaters has not

been verified. The SID may further require to confirm that there is no other


Liability Profile (Rs. In crore) General Labour Basic Wages 2.76 PF 0.74 Bonus 0.23 Upadhan 0.92 Arrear 0.04 Total 4.69 Cost of Exit Scheme for All Employees 0.42 Gross Total 5.11




Based on the technical assessment, the Warisaligunj unit is a very old plant

having low pressure boilers and except the milling tandem, most of the

equipment will have to be replaced. The unit can be expended to 1500 TPD with

a distillery based on juice along with a cogen of 7 MW. For this a boiler, TG set

and a distillery shall have to be installed. Complete plant shall be converted to an

electric driven plant and mills shall have to be relocated and driven by

individual drives and provided with rake type inter carriers, Donnelley chutes

etc. Remaining equipment except some can be disposed off. The distillery

capacity shall be 90 KLPD. The expansion process would require an

implementation period of about 15-18 months. Hence it can be inferred that the

unit is viable with above proposed expansion.






expansion of the unit. It is also proposed that the factory colony may be allowed

for usage for expansion of unit. The colony may be shifted to some other

location, preferably the nearest farm land subject to necessary approvals.

However in case of further expansion the allotment of sugarcane command area

would also need to be suitably increased.

Considering the revival possibility with expansion to 1500 TPD with a distillery

based on juice, an incremental cost of Rs. 140 crores would be required, if some

of the usable machineries of the existing mill are refurbished and used. For

efficient operation of the unit post-revival, and considering such additional



amount to be invested, it may be worthwhile to invite private players for

running the unit.








a. Secured Loans (Rs.0.23 Crore)





b. Unsecured Loans (Rs 0.84 Crore)




c. Cane Growers Dues (Rs.0.06 Crore)







c) Labour Dues (Rs.5.11 Crore)









Scheme, etc has to be arrived between the Labour unions and the BSSCL before


already estimated an amount of Rs 0.42 crore in the event of Exit Scheme is

offered to all its employees. It is desirable that an Exit Policy scheme may be

framed preferably by engaging the HR consultants.



















2. Payment of Dues to Banks and Financial Institutions including SDF

loan, if any.








and tax arrears may be waived/settled by the GoB.



8. Litigation Cases



As per the findings of the Legal Advisor and as mentioned in the report, the

following cases have been found;

Hon.ble High Court ,Patna

1. M.J.C. No. 699 of 2002 (Mahendra Prasad Singh Vs the Bihar State Sugar

Corporation Limited) (Arising out of C.W.J.C. No. 8754 of 2001) -

Contempt matter.

2. M.J.C. No. 1204 of 2004 (Mahendra Prasad Singh Vs. the Bihar State Sugar

Corp. Ltd.)-Contempt matter.

3. C.W.J.C. No. 14565 of 2005 (Shri Gokul Choudhary & anr.Vs. the Bihar

State Sugar Corp.Ltd.) -Service Matter against Termination of Service.

4. C.W.J.C. No. 13827 of 2006 (Balmiki Singh & anr. Vs. the Bihar State Sugar

Corp. Ltd.) -Service Matter for Regularization of Service.

Cases pending in the other courts:

5. Complaint Case No. 113 of 2006 (Bimla Singh w/o Late Balram Singh Vs.

the Bihar State sugar Corp.Ltd.) pending before Consumer Forum at

Madhubani.

6. T.S. No. 188 of 2004 (Bhagwat Mahto Vs. the Bihar State Sugar Corp. Ltd)

7. Certificate Case No. 12/96-97 pending before the Certificate Officer,

Nawada for realization of certificate dues of Rs. 16,92,811/- by Certificate

Holder, Bihar State Electricity Board.

Note: None of the cases are in the way in the present process of bidding.


opined that the BSSC has marketable Title over the property.






been made as per the above scheme) and due to reasons of the above litigation,

and if the implementation of the construction cannot be progressed during the


Government may undertake to make good the losses suffered if any.









Revival Plan.