UP sugar mills move court over cane price

Under pressure of sugarcane price payments and mounting arrears, fifteen sugar mills in Uttar Pradesh have filed a case against the state government challenging its mechanism of determining the state advised price (SAP) of sugarcane.

"The mills that have filed a case include Jagran Group's Shakumbari Sugar and Allied Industries, Aditya Jhunjhunwala's KM Sugar Mills and JK Industries' JK Sugar. The cases are expected to come up for hearing in July," said an Indian Sugar Mills' Association (ISMA) executive. The cases were filed during the last days of Mulayam Singh Yadav's tenure.

The SAP of sugarcane in the country's biggest sugar producing state has gone up to Rs 125-130 per quintal in 2006-07 from Rs 95-100 per quintal in 2000-01. The SAP is different from the statutory minimum price (SMP) of sugarcane fixed by the Centre.

In 2004, both the Supreme Court and the Allahabad High Court had upheld the right of state governments to fix sugarcane price over and above the SMP. Consequently, states like UP and Haryana have been steadily revising the SAP every year to please the sugarcane farmers who constitute a sizeable vote bank.

However, while doing so these governments did not take into consideration the market conditions. In UP alone, more that one crore farmers are engaged in sugarcane cultivation.

"While the Centre's SMP is calculated on the basis of criteria like the cost of sugarcane production, the price at which sugar produced from sugarcane is sold, the recovery of sugar, the state governments have been arbitrarily increasing sugarcane prices," said an industry source.

"The gap between the Centre's SMP and the UP government's SAP has widened over the years. For the 2006-07 season, the gap between the SMP and the SAP is as high as Rs 40 per quintal," said CB Patodia, president, UP Sugar Mills' Association and advisor to the Birla Group of Sugar Companies.

For the 2006-07 sugar season (October-September), the UP government had hiked the SAP by Rs 10 taking the sugarcane value to Rs 125-130 per quintal. This, despite a decline in sugar prices to Rs 1,350 per quintal from about Rs 2,000 per quintal last year. With higher cane prices, mills are not even able to recover the cost of production.