Many private sugar mills in west Uttar Pradesh have been forced to close down as sugarcane growers in the region have decided against supplying their produce to private mills that do not pay the state-advised price (SAP).
The movement threatens to engulf the entire state. Mahendra Singh Tikait has called for a state-wide boycott of private sugar mills if no agreement is reached by January 27.
It all started when the Western UP Sugar Mills Associations challenged in the high court the legality of the SAP of sugarcane, fixed at Rs 72 and Rs 76 a quintal for early- and late-maturing varieties.
The high court ruled that the SAP was illegal and the state had no right to enforce it. The court allowed the state-owned and cooperative sugar mills to pay the SAP. It said the mills and cane growers societies were free to reach an agreement in the format provided by the UP Sugar Cane Supply & Purchase Order, 1954, which would be legally enforceable.
The practice of the SAP in Uttar Pradesh started in 1973. There has always been a marked difference between the statutory minimum price (SMP) of the Union government and the SAP.
In the current financial year, the SMP has been fixed at Rs 45.90 a quintal linked to basic recovery of 8.5 per cent sugar and subject to a premium of Rs 0.57 for every 0.1 per cent increase in the recovery above that level.
Thus the average SMP for the state comes to Rs 50.33 a quintal. But the Bhargava Commission report of 1974 had stipulated that the sugarcane growers must be paid Rs 7 a quintal to give them a share in the profits generated through free sale of sugar.
Thus the mill owners in UP are liable to pay Rs 57 a quintal, substantially lower than the state-advised price.
However, the state government has declared that the state-controlled cooperative mills will continue to pay the SAP, irrespective of the high court order. Shashank Shekhar Singh, secretary to the Governor, declared that the government could not go back on the prices it had fixed.
Sticking to the SAP will cost the government-controlled companies an additional Rs 130-250 crore, according to varying estimates. This may derail the state governments plans to raise Rs 1,000 crore extra as additional resource mobilisation for its annual plan.
The government has persuaded the mill owners to pay Rs 70 a quintal for sugarcane, but they want to pay it in three phases: Rs 62 as soon as the sugarcane is brought to the mills, Rs 4 when it has been crushed and Rs 4 when the new season begins.
A spokesperson for the Uttar Pradesh Sugar Mills Association said: We have agreed to pay Rs 62 only because otherwise we will not get sugarcane.
However, state sugar secretary Sidhartha Behura says the mill owners have agreed to pay the price voluntarily, not under government pressure.
The state thus has two price levels for sugarcane: one which will be paid by government-controlled sugar mills and the other by those in the private sector. There are 118 sugar mills in Uttar Pradesh of which 70 either belong to the Sugar Corporation or are in the cooperative sector.
The number of private sugar mills is 48 and most of them are in western UP.
The Uttar Pradesh government has held meetings with sugarcane growers as well as private mill owners, but there is no settlement in sight yet.
