Sugar mills' case put on fast track

Daily hearing on challenge to UP government’s state advised price; millers hope for early interim relief.

The Allahabad High Court has agreed to give a daily hearing in the petition filed against the Uttar Pradesh government’s methodology in fixing the sugarcane prices to be paid to growers by sugar mills.

The petition was filed by the Indian Sugar Mills Association (Isma) in mid-November, challenging the 20 per cent rise allowed by the state government. The state had fixed the State Advised Price (SAP), the statutory minimum amount to be paid to farmers for cane procurement, at Rs 240 a quintal for the early variety and Rs 250 a quintal for the late variety — a substantial rise from Rs 205 a quintal and Rs 210 a quintal, respectively, from last year.

“We are of the view that mills in the state will get some interim relief, as granted by the same court in 2006-07. Since the price of sugar in the spot market stands lower than the estimated cost of production, mills will suffer badly if they continue crushing for this season,” said a senior company official.

A similar case was filed in 2006-07, when the state government had raised the SAP to Rs 125 a quintal from Rs 105 a quintal the previous year. The HC in that case had allowed mills to pay a minimum of Rs 110 a quintal.

According to trade sources, many mills have deferred the start of cane crushing, due to the uncertainty on prices.

“With the massive hike in cane prices and general increase in other inputs, our cost of production in UP in 2011-12 is estimated to be Rs 33-34 a kg, while that in Maharashtra is expected at Rs 29-30 a kg. Hence, ex-mill prices should be allowed by the government to stabilise at these levels. Anything less would mean losses to mills and cane price arrears by January 2012 itself,” said Abinash Verma, secretary-general of Isma.

In the past four days, sugar prices have fallen to Rs 2,775 a quintal from Rs 3,000 a quintal. The rise during last week was largely due to the higher cane prices announced in UP and Mahara-shtra, the major producing states. They fell after declaration of a non-levy quota of 1.7 million tonnes announced for December by the central government. This, millers and traders say, is causing panic. They fear a further fall.

Yogesh Pande, founder-president of the Maharashtra Sugar Traders, said sugar was the most controlled commodity, wherein prices of all raw materials, levy sugar and quota for sale in the open market for each month were all decided by the government. “Therefore, there is a case for fixing a minimum assured price for sugar, which will ensure long-term stability in open market prices,” he said.

Overall sugar output in India is estimated this season at 25.5 mt, as against 24.2 mt last year. With an estimated carryover stock of nearly five mt, total supply works out to nearly seven mt higher than the estimated consumption of 22.5 mt, says Isma.