UP sugar mills move HC against state price

The Uttar Pradesh sugar industry has challenged the state-advised price (SAP) for sugarcane for the 2010-11 season (October-September) in the Allahabad High Court.

“The state government has no power to fix SAP after the fair and remunerative price (FRP) is decided by the central government,” the mills’ apex body, the Uttar Pradesh Sugar Mills’ Association (UPSMA), said in its petition, filed yesterday.

UP is the second-biggest sugar producing state after Maharashtra. Top sugar companies such as Bajaj Hindusthan, Balrampur Chini and Triveni Engineering have operations in the state.

The cane price fixed by the UP government has seen a lot of litigation in the past. In two consecutive seasons, 2006-07 and 2007-08, the UP sugar industry challenged SAP and got relief from the courts.

In 2006-07, the Allahabad High Court quashed the price, declaring it “arbitrary”, and the Supreme Court asked the mills to pay Rs 118 as against the then SAP of Rs 125. In 2007-08, the Lucknow Bench of Allahabad High Court asked the mills to pay Rs 110 as against the SAP of Rs 125.

In its petition, the association claimed the mills did not have the capacity to pay Rs 205 a quintal. Last week, the UP government announced a record rise of Rs 40 a quintal in SAP for the 2010-11 crushing season (October-September). SAP for the common variety is now Rs 205 a quintal while SAP for the early variety is Rs 210. The FRP is Rs 139 a quintal on 10 per cent recovery.

UPSMA said in its petition that millers in the state lost Rs 3,000 crore in the 2009-10 season as the average realisation per quintal sugar was Rs 2,900 as against the breakeven cost of Rs 3,600 a quintal. It also said the ex-factory sugar price was expected to remain in the range of Rs 2,400-2,500 a quintal, for which the paying capacity would be between Rs 161 and Rs 168 a quintal.

An association official said UP Sugarcane Research Institute had arrived at a sugarcane cultivation cost of Rs 139.30 a quintal for the current season. After including margins and risks, the cane price should not be more than Rs 160 a quintal, he said.

Meanwhile, the mills are expected to start crushing only by month-end. The recovery rate, an industry official said, was less than eight per cent and it did not make sense to begin crushing now. The rate points to the amount of sugar produced from sugarcane. A few mills that have started crushing in the state are witnessing a recovery rate of less than eight per cent compared to the usual rate of over nine per cent.