Cane arrears: HC asks UP private mills to liquidate sugar stock by Oct 31

The private mills carry dues of Rs 4,600 cr to be paid to farmers pertaining to the 2013-14 crushing season

Allahabad High Court today directed private sugar mills in Uttar Pradesh to liquidate their sugar stock by October 31 for payment of cane arrears.

This way, the HC division bench comprising Chief Justice D Y Chandrachud and Justice Dilip Gupta disposed off the petition filed by Rashtriya Kisan Mazdoor Sangathan convener V M Singh over arrears.

The private mills carry dues of about Rs 4,600 crore to be paid to farmers pertaining to the 2013-14 crushing season.

The private mills numbering 95 hold a stock of nearly 2.75 million tonnes (MT) of sugar. This is 42% of total sugar production of 6.45 MT in UP during 2013-14 by 119 mills, which includes private, cooperative (23 mills) and one state sugar corporation unit.

On August 13, the HC had directed private mills to liquidate 15% of their sugar stock in three weeks at the floor price of Rs 3,100/quintal. However, in its final verdict, the court has not mentioned any floor price and if the stock is liquidated, say at Rs 3,100/quintal, it would raise over Rs 8,500 crore.

A sugar industry official refused comment saying they were studying the order and its implications on sugar companies. "It is the final order and we need to properly study it before we can make any comment," he told Business Standard.

However, he admitted selling such a huge quantity of sugar in a short span of time was a tall order, besides it could lead to crashing of the sugar prices further.

Meanwhile, the HC offered no express relief to State Bank of India (SBI), Punjab National Bank (PNB) and UP Cooperative Bank, who had, through separate petitions, staked preferential right on liquidation proceeds of sugar stock, contending the mills had taken working capital loans based on the stock.

The 23 cooperative mills and the lone sugar corporation unit had already settled their cent percent arrears. The cooperative mills were given largesse in the UP budget for the purpose.

The mills have been claiming high cane price in UP and the unscientific price fixation mechanism was responsible for the crisis in the sugar sector, that supports over 4 million farmers' families. The sector is estimated at Rs 30,000 crore.

About 66 private mills had already notified the state about suspension of operations in the coming crushing season. They are demanding that the government first adopted a scientific formula for cane price fixation.