HC scraps UP govt's sugar price order

Recommends setting up of a committee to calculate cane prices afresh

The Allahabad High Court today quashed the Uttar Pradesh government's state advised price (SAP) of sugarcane for the 2006-07 season (October-September).

The court also recommended the constitution of a committee headed by a retired judge to calculate sugarcane prices afresh. The committee will have representation from all stakeholders "" the farmers, the mill owners and the government.

Stocks of all the sugar companies, based in Uttar Pradesh, today jumped 10-12 per cent after the Allahabad High Court directive that could result in cash-strapped mills paying a lower sugarcane price. 
 

SWEET PILLS Stock prices of sugar companies
	Dec 18, 2007	Dec 19, 2007	% chg
Balrampur Chini	101.65	113.50	11.66
Dhampur Sugar	84.90	94.70	11.54
Bajaj Hind	258.75	284.30	9.87
Simbhaoli Sugars	52.50	55.10	4.95
Shree Renuka Sugars	942.95	975.15	3.41

Industry representatives have welcomed the development."There is a recognition for aligning the interests of various stakeholders while fixing the sugarcane price. The judgement should pave the way for a more rational methodology of sugarcane price fixation", said Vivek Saraogi, managing director, Balrampur Chini Mills.

Balrampur Chini gained 11.66 per cent to close at Rs 113.50, Dhampur Sugar gained 11.54 per cent to close at Rs 94.70, Dwarikesh Sugar gained 10.74 per cent to close at Rs 100.05 while Bajaj Hindusthan gained 9.87 per cent to close at Rs 284.30.

"This is a positive development for the industry. We are optimistic that the ultimate sugarcane price will take care of farmers, consumers and the industry. However, our profitability will depend on the final sugarcane price," said Nikhil Sawhney, vice president, Triveni Engineering and Industries.

In the 2006-07 season, while cane prices were raised about 8 per cent, sugar prices fell 30 per cent due to a bumper harvest.

As a result, all sugar mills in the state reported a loss for the first two quarters of the current financial year. Also, last season's cane arrears to farmers stand at Rs 1,100 crore even as the new season has begun.

Currently, mills are buying sugarcane at Rs 110 a quintal following the November 15 Allahabad High Court interim price order. This is significantly lower than the SAP of Rs 125-130 a quintal. Meanwhile, the Lucknow Bench of Allahabad High Court has adjourned the hearing on interim price till January 7.

NewsWire18 adds: Meanwhile, according to a report by NewsWire18, the Lucknow Bench of the Allahabad High Court today has asked the state government to scrap the state advised price for cane and fixed a lower price of Rs 81.18 per 100 kg in the current sugar season, an industry official said.

The Bench, in an interim order, had earlier asked sugar mills in the state to pay Rs 110 per 100 kg to farmers for cane as against the state advised price of Rs 125.

The state's sugar industry had been asking the government to lower cane price to Rs 81.18 per 100 kg""the statutory minimum price set by the Centre.

Another industry official said the Bench also questioned Uttar Pradesh government's method of fixing the state advised price for cane and asked to streamline it.

The official said the effective cane price that mills in the state now have to pay farmers works out to about Rs 90.19 per 100 kg, as the average sugar recovery from cane is higher this year.

Mills in Uttar Pradesh are reporting 10 per cent sugar recovery from cane this year as harvesting was delayed.

According to the central government norms, for every 1 per cent increase in sugar recovery above 9 per cent, the cane price that mills pay to farmers goes up by Rs 9 per 100 kg over the statutory minimum price.

Mills have all the more reason to celebrate, as the Allahabad High Court has also asked the state government not to take coercive action against mills which have pending cane arrears from the 2006-07 (November-October) season.

Mills in the state had cane arrears of over Rs 1,400 crore as on October 31. The state government had sealed units of all mills that were yet to pay farmers for last year's cane.