HC ruling on delicensing of sugar stayed

The Supreme Court today stayed the Allahabad High Court judgment declaring the delicensing of the sugar industry illegal.

For the time being, the cane commissioner in Uttar Pradesh will deal with the allocation of cane, reserved areas and other issues affecting sugar units in the state.

The Supreme Court Bench, consisting of Justice Arijit Pasayat and Justice GP Mathur, passed the order after the state government gave an assurance to existing sugar units that they would not face problems over cane supply.

The state government counsel told the court that there was abundant cane and no one will suffer for the want of it. But the supply would not necessarily be from any particular area. "The quantity is ensured, but not the area," the counsel said.

Earlier, Additional Solicitor-General Gopal Subramaniam asked for a complete stay of the High Court judgment as it had far-reaching implications. The High Court was wrong in law when it said the 1998 notification under the Industries (Development & Regulation ) Act required Parliament's approval, Subramaniam felt.

Bajaj Hindusthan Ltd, whose expansion scheme, along with that of many other sugar firms in Uttar Pradesh, has been severely hit by the High Court decision, also appealed to the Supreme Court for a stay.

The High Court judgment had prohibited Bajaj Hindusthan from establishing a sugar mill without obtaining licence under Section 11 of the Industries (Development & Regulation ) Act. The High Court had cancelled various permissions already granted for setting up units without licences.

A large number of sugar mills have appealed to the Supreme Court. Meanwhile, there is a parallel legal wrangle in the Allahabad High Court following its judgment over the allotment of land and cane. All these detailed issues will now be sorted out by the cane commissioner.

The whole litigation was started by Monnet Sugar Ltd in the High Court, where Bajaj Hindusthan was one of the respondents. In the Supreme Court, Monnet counsel FS Nariman asserted that sugar was a central subject and that the state had no power to issue notifications, delicensing the industry.

Moreover, companies are rushing in to set up units because they are replenished their entire investment in seven years through exemptions and remissions.

According to the state government, it had given incentives to the sugar industry for attracting capital after liberalisation. Sugar production in the state has been falling for decades, and picked up only now.

The High Court ruling, quashing the delicensing policy of the 1998 Press Note with retrospective effect after six years, will stop the inflow of capital of around Rs 3,500 crore, according to the state government.