HC asks UP govt to submit details, formula for fixing state's cane price

Allahabad HC did not restrict the Yogi Adityanath government from fixing SAP for the current crushing season 2018-19 or make any observation regarding its maintainability

Allahabad High Court's Lucknow Bench on Tuesday directed the Uttar Pradesh government to provide details about the basic premise and formula of arriving at the State Advised Price (SAP) of sugarcane every year.    

The HC was hearing a petition filed by UP Sugar Mills Association (UPSMA) challenging the tenability of SAP despite the central government announcing the cane Fair and Remunerative Price (FRP) every year for all cane growing states. The petitioner said there was no logic behind SAP and it was fixed arbitrarily. 

The HC asked the state to furnish details of cane price fixation and whether the relevant information provided by the association and others have been duly considered while arriving at the SAP. Besides, the Bench sought to know if the sugar floor price of Rs 29 per kg as declared by the Centre under the Essential Commodities Act had been factored in the final state cane price.

However, the HC did not restrict the Yogi Adityanath government from fixing SAP for the current crushing season 2018-19 or make any observation regarding its maintainability. It has summoned all the details and the procedures/formula used to arrive at the SAP and posted the matter for hearing on December 10.  

Last year, the Adityanath government had declared SAP in October. However, this being an election year, it has so far dithered on the matter. While the farmers have demanded cane price of almost Rs 400 per quintal citing higher farm input costs, the private millers, numbering around 94, have expressed inability to even pay at last year's SAP level of Rs 315 per quintal for common variety of cane.

However, the state is expected to declare SAP in the next four-five days. The private millers have already warned that due to market glut and low prices, any hike in cane price would result in a massive build-up of arrears going forward, like in the last crushing season. 

Owing to sugar market glut and falling prices, domestic sugar companies have been facing cash flow challenges, which has prompted commercial banks to put the sector in the negative list. 

Meanwhile, UP sugarcane arrears for the 2017-18 season stand at almost Rs 67 billion, with only three more days left for the deadline of November 30 fixed by the CM for the millers to settle their outstanding.

Interestingly, the current crushing season is underway with 102 of the total 121 sugar mills already operational.

On several occasions, Adityanath has also conceded the prevailing domestic sugar crisis due to market glut and crash in the global sugar prices. To help millers recover from the outstanding hurdle, the state had announced a soft loan package of Rs 40 billion and the millers have already applied for loans worth more than Rs 33 billion under the scheme.

However, several sugar companies, including Bajaj Hindusthan Group, which operates 14 mills in UP, were not eligible for soft loan owing to their paying percentage being comparatively lower. According to sources, the state might allow such millers an extended window of another month till December end to repay farmers from the proceeds of their current season's sugar sales.

This year, UP cane acreage is estimated at 2.6 million hectares (MH), up 18 per cent from about 2.2 MH during 2017-18, when UP had clocked sugar production of over 12 million tonnes, with farmers' payables touching Rs 354 billion.