Sugar mills divestment: Lokayukta calls auditors

Mehrotra confirmed that his office has called the Accountant General to discuss issues related to the CAG report on sale of sugar mills,including the basis for calculating the cost of sugar mills done by the core group of secretaries on disinvestment (CGD).

Sources involved in the inquiry said one of the main objections of the CAG to the disinvestment process was

that the CGD increased the weightage of Discounted Cash Flow (DCF) method of evaluation and decreased the weightage of assets valuation method.

The DCF method relates the value of an asset to the present value of expected future cash flows of the asset. It is based on the principle that for any initial investment an investor will assess future cash flows from that entity to provide a minimum return.

“The CGD’s decision to increase the weightage of DCF method 2:1 compared to earlier decided ratio of 1:2 claiming the plea of prospective buyers resulted in the reduction in the sugar mills’ price. But we have not found that this was in violation of any rules so this needs to be clarified,” said a senior official in the Lokayukta office.

The Akhilesh Yadav government had asked Lokayukta to conduct an inquiry into the alleged irregularities in the sale of sugar mills during Mayawati regime. The state government had asked the Lokayukta to conduct his inquiry on the basis of the CAG report which had claimed a loss of Rs 1,179 crore to the exchequer in the sale.

The report had alleged that 21 sugar mills – owned by Uttar Pradesh State Sugar Corporation Limited (UPSSCL) and Uttar Pradesh Rajya Chini Evam Ganna Viaksh Nigam Limited (UPRCGVNL) – were sold to private entrepreneurs at low prices. The firms which bought the mills included some linked to killed liquor baron Ponty Chaddha.