Bajaj Hindusthan's Rs 150 cr stock seized

Action due to non-payment of last season's cane price to farmers.

The Uttar Pradesh government has seized stocks from three sugar mills owned by Bajaj Hindusthan, the country's largest sugar producer, for non-payment of last season's sugarcane price to farmers.

Of Rs 580 crore that sugar mills in the state owe cane-growers for the last season (October-September), Bajaj accounts for almost Rs 300 crore.

The three mills from which stocks have been seized are located in Kinauni in the Meerut district, Gola (Lakhimpur Kheri) and Barkheda (Pilibhit). The stocks in these units are valued at Rs 50 crore each.

"The company cannot sell any quantity from these three mills. The district magistrates in each of the three districts will sell these stocks and use the money to clear the company's dues," said a state official.

This action by the state government follows the issue of recovery certificates (RC) against these three units last month. Bajaj runs 14 sugar mills in the state. This is the first time the company's stocks have been seized.

A company official declined to comment. Bajaj Hindusthan's share price at the Bombay Stock Exchange today closed at Rs 259.40, down 5.26 per cent from the previous close.

The seizure follows several court order. In an order on December 19, the Allahabad High Court had quashed the state's 2006-07 state advised price (SAP) of Rs 125 to Rs 130 a quintal. The state government was directed to reassess the SAP "backed by reasons giving adequate outlines of norms, criteria or guidelines".

Pending the new SAP, mills were obliged to pay only the Centre's statutory minimum price (SMP), which is in the range of Rs 85 to Rs 90 per quintal for 2006-07.

Following this, Bajaj Hindusthan had adjusted its balance sheet using SMP instead of SAP for accounting purposes and reported a net profit of Rs 45.65 crore for the year ended September 30, 2007.

However, the Supreme Court last month passed a stay order on the high court's order quashing the 2006-07 SAP, after which the state government issued RCs against these units.

The Supreme Court, in its hearing yesterday, asked the state government not to take coercive action against the state mills. "We will not take further action against the mills, but the status quo will be maintained," the official added.

Arrears to cane farmers have grown principally because of record sugar production in the 2006-07 season that saw prices crash about 35 per cent and impacted sugar companies' profitability.

The six-month-long export ban imposed by the government in June 2006 to control inflation rate depressed domestic sugar prices further. This led to a slump in the sugar cycle and leading companies began incurring huge losses and, therefore, delayed paying farmers their dues.

The UP sugar mills also delayed their crushing by a month in the current season owing to their differences with the state government over sugarcane prices.

The delay had forced many farmers to dump their sugarcane at jaggery units at throwaway prices in a bid to vacate fields for sowing wheat. Mills agreed to run only after the high court intervened and announced an interim cane price of Rs 110 a quintal against the SAP of Rs 125-130.