The rule requiring sugar companies to meet the unlifted portion of what is known as the levy sugar quota for up to two years unless the central government takes this off its hands is too unreasonable to pass legality, says a recent verdict of the Patna high court.
The verdict says the companies are entitled to sell at the end of each season any portion of the quota the government is unable to lift. As for the current unlifted stock of about 2.1 million tonnes in all, the order gives the central government three months to take it. If not, the companies may sell it at the market price. Since the court order was issued on January 12, the time limit in this regard is April 12.
It is practically impossible for the government to lift such a huge quantity in the remaining month. With a difference of Rs 11 per kg between the levy and open market price of sugar, mills can realise around Rs 2,300 crore. However, the Union food ministry has planed to challenge the order before a larger bench of the HC. It is learnt that industry bodies, including the Indian Sugar Mills Association (Isma), will seek to implead themsleves in the case if that happens.
According to the rule, a portion of the sugar made by each mill has to be given to the central government for distribution through ration shops. The percentage of output to be set aside in this manner (10 per cent, at present) and the price at which it is to be given to the government are both set by the latter. And, as mentioned, if the government is unable to or does not, for any reason, take the sugar in question, termed the ‘levy quota’, the mills cannot dispose it, in effect. They can sell within three months but, on demand, the obligation has to be met at the price of the year for which the levy sugar was allotted.
All this, says the HC verdict, is “unfair, arbitrary and unreasonable”. The judgment was given in a petition filed by a Vishnu Sugar Mills. After liquidating the existing stock as noted earlier, the court says “from the next sugar production year, commencing from October each year, there would not be any carry-forward of past liability and the levy liability would start with a clean slate every year”.
Isma director-general Abinash Verma said the industry welcomed the decision. “Carrying forward of previous years’ levy obligation is a financial burden for mills, as they have to supply it at a previous year’s price. Mills also bear the inventory cost.”