Bajaj Hind moves SC over sugar delicensing

Sugar major Bajaj Hindusthan Ltd (BHL) has moved the Supreme Court against the Allahabad High Court ruling last month terming the delicensing of sugar sector illegal.

Company executives refused to comment. BHL along with the Union industry ministry and the Centre were respondents to the writ petition (No 36,685) filed last year by Monnet Sugars Ltd.

The industry ministry, said an official, had sought the help of the sugar department, under the food ministry, to prepare a petition against the HC ruling.

The ruling terms the delicensing illegal as amendment to the Industries Development and Regulation Act is awaited. Monnet's petition called the delicensing "an executive attempt to deregulate the sugar industry be invoking power of exemption under the said Act without Parliamentary sanction".

The petitioner also alleged that huge cane crushing capacities were being created, denying it access to its cane area.

The expanded capacity, the petitioner said, was coming too close to the 15 km zone restriction. Under the law, sugar mills have a spatial monopoly over an area of 15 kilometres and new mills cannot be established in breach of this zoning regulation.

In 1998, through a press note, the Centre announced delicensing of the industry. The move was a follow-up to the Mahajan Committee recommendations.

While the committee recommendations had opposed delicensing, the policymakers acted otherwise. The committee had also called for increasing the minimum distance between two factories to 25 km.

With terming the delicensing illegal, the HC has issued a stay order on the creation of new capacity or expansion of existing crushing capacity of sugar mills in Uttar Pradesh.

The UP sugar sector is witnessing an investment boom with over Rs 4,000 crore likely to come in over the next two seasons (that is, October-September), following a state government's promotion policy announced last August.

Leading the investors' pack is Bajaj Hindusthan (Rs 1,500 crore), Mawana Sugars Ltd (Rs 535 crore), Balrampur Chini Mills and DCM Shriram Consolidated Ltd (Rs 500 crore each), among others.

The expansion by big players, however, is just a death knoll for smaller mills, apprehending limited availability of cane. Sources say the sale of 55 per cent stake in Prathappur Sugar and Industries to Bajaj Hindusthan is an example of this.

While a section of sources say cane prices may crash if there is a freeze on capacity and big mills are not allowed to buy cane.

Another section, however, says that this is unlikely to affect prices and it will be rather be better to wait and watch.

Domestic sugar prices are likely to remain firm while good export opportunities emerging in neighbouring countries such as Pakistan and Bangladesh and prices are seen moving up globally too.