Banks first, farmers later, HC told

The stock has been seized by govt since the owners of the sugar mills have not paid the cane farmers

With the state government set to auction sugar seized from mills owing money to cane farmers, banks have asked the Allahabad High Court for priority access to the money raised, to get back the money they’d loaned to the mills.

The mills usually take working capital loans on the movable assets, the stocks of sugar. Term loans are taken on immovable assets such as factory, land and so on.

Currently, the state government holds 2.98 million tonnes of sugar from private mills for auction, following the latter’s failure to clear their dues to farmers. The HC is hearing a case in this regard on arrears in the state, estimated at Rs 5,400 crore in the current crushing season. The case was filed by V M Singh, convenor of Rashtriya Kisan Mazdoor Sangathan.

State Bank of India (SBI), Punjab National Bank (PNB) and UP Cooperative Bank have given separate petitions to the HC for the first right on the liquidation proceeds. A bench chaired by Chief Justice D Y Chandrachud has directed the state government to apprise it about the status of working capital loans secured by private mills. The state’s cane department is to collect district-wise data in this regard. The next date of hearing has been fixed by the HC for August 12.

Almost 70 per cent of the 95 private mills have taken working capital loans. The consolidated sum is likely to run into several thousand crore rupees. The total seized stock would fetch the state government a  little under Rs 9,000 crore if auctioned at Rs 30/kg.

On August 1, the government had informed the HC it could not auction the stock due to uninterested buyers and the ‘kanwar mela’ in western UP, where a majority of the mills are situated. The government has registered a little over 60 First Information Reports (FIR) with the police and issued Recovery Certificates (RCs) against 52 mills. Pursuant to the RCs, issued by the cane commissioner, the respective district administrations had seized sugar stocks for auction, so that the farmers’ dues could be settled.

About 230,000 tonnes from 23 cooperative mills is also with the government for auction. Sugar is the largest organised industry in UP, the size estimated at Rs 30,000 crore. Cane farming supports about four million farmers.