Peeved at the state’s insistence that there should not be any delay over the commencement of crushing of cane this season, private sugar mills in Uttar Pradesh are set to drag the government into a legal issue. The UP Sugar Mills Association (UPSMA) is filing a case in the Allahabad High Court tomorrow against “coercion” from the Mayawati regime.
Basically, the mills will be seeking interim relief from the court over cane prices as provided in 2007-08, when the government had exorbitantly raised the state advised price (SAP) for the crop to Rs 125 a quintal. That time, the court ordered interim relief for the mills by announcing SAP of Rs 110 a quintal. UP has 103 of its 125-odd sugar mills in the private sector.
For now, these mills want to avoid pressure from the state machinery regarding the commencement of crushing. Reason: the procurement quantity of cane from farmers is unviable, given the current SAP, according to a senior UPSMA official.
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The association had, in a letter to chief minister Mayawati yesterday, asked the government to “stop coercing” the mill owners. The millers claim the local administration was pressurising them to sign Form ‘C’ (an agreement between a sugar factory and the cane society) and start marking SAP on indents (issued at the time of cane procurement). “In case the factories have to sign the ‘C’ Forms and mark SAP on the parchies under pressure, it will be without prejudice to the rights and contentions of the factories before the court,” the letter reads.
On her part, the chief minister, while announcing the SAP for the current year, has asked the mill owners to start crushing immediately so that farmers could vacate the field for wheat sowing. This year too, the government raised the SAP by nearly 20 per cent, resulting in a huge financial burden on the ailing sugar mills.
The SAP was increased by Rs 35 to Rs 240 a quintal for normal variety, which accounts for over 60 per cent of the total cane production. Each of the early and rejected varieties of cane account for roughly one-fifth of the production. The rejected variety would now sell for Rs 235 a quintal -- a rise of Rs 35 from the previous year. The early variety will cost Rs 240 a quintal this year; it’s a rise of Rs 40 from the previous year.
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Ideally, the mills commence crushing only after the government announces the SAP of sugarcane. Since, the announcement this time came only two days ago, the mills would now gradually start crushing for the current season.
In western Uttar Pradesh, some 15 mills have already started crushing for the current season. After an interval of 7 to 10 days, the crushing activity starts in central and eastern Uttar Pradesh. This would, even otherwise, start in the third week of this month, according to Abinash Verma, secretary general of the Indian Sugar Mills Association.
Since the crop has not matured in central and eastern Uttar Pradesh, the cane would not lose quality. “In any case, there is no crushing within the stipulated 10 days’ time,” he added.
With the SAP hike, the government now expects a total sugarcane payments of Rs 15,000 crore to farmers during 2011-12 crushing season vis-à-vis Rs 13,000 crore last year. The millers estimate a 17-18 per cent rise in average cost of production to Rs 33-34 a kg, from Rs 27-28 a kg, affecting their profitability.
An industry official said working capital of the sugar mills would erode in two months, if they were forced to crush cane at the current SAP. “Also, the farmers’ arrears would start piling up to reach new record this year,” he added.