SC order to empty UP mills' pocket, for now

In a major blow to Uttar Pradesh sugar millers, the Supreme Court today directed them to pay the full, state-set, price for cane bought in seasons 2006-07 and 2007-08 within three months. This translates into an extra Rs 1,100 crore outgo for the mills.

The had got interim relief in both years, to pay for the same at a rate lower than what the state government had set. The relief was given by the apex court but was vacated today.

“We will have to fork out Rs 110 crore more over the next three months to honour the judgment. As it is, we are already stressed and are finding it difficult to pay farmers the current state-advised price (SAP) of Rs 240 per quintal,” said Kishor Shah, director (finance), Balrampur Chini.

Shah said that against an SAP of Rs 125 per quintal in 2006-07 and 2007-08, Balrampur and other companies in the state had paid Rs 118 and Rs 110 a quintal, respectively. The burden on Bajaj Hindusthan is estimated at Rs 250 crore.

However, in a positive development for the mills, the SC agreed today to have a seven-judge bench reconsider a 2004 decision authorising state governments to announce a price for cane.

In May 2004, a five judge bench of the SC had, by a 3-2 majority, upheld this power of states. on the argument that this was complementary to the reservation orders issued by latter, binding growers in an area to supply cane to particular mills to which that area was assigned.