Rs 260 cr blow for UP sugar mills

HC asks UP mills not to charge transportation cost from farmers.

The sugar mills in Uttar Pradesh have received yet another setback that will translate into an additional burden of Rs 260 crore.

The Lucknow Bench of the Allahabad High Court has directed the mills not to deduct Rs 5.75 a quintal from the interim sugarcane price of Rs 110 a quintal as transportation cost for the sugarcane delivered at their purchase centres.

The mills deduct Rs 5.75 from the price paid to the farmers, who sell their sugarcane at the centres. However, farmers who sell at the millgate are paid the full price of Rs 110 without any deduction.

On an average, the mills receive 50 per cent of their cane requirement at the centres and rest at the millgate. Mills are expected to crush 90 million tonnes of sugarcane this season (October-September), half of which, or 45 million tonnes, may get delivered at the centres.

At a rate of Rs 5.75 a quintal, mills will have to bear an additional burden of Rs 258.75 crore for transporting the sugarcane from the centre to mills.

"This is a setback for the mills, the margins of which are already under pressure due to higher sugarcane prices," said a mill owner.

Last Friday, the Supreme Court had given a stay on the December 19 Allahabad High Court judgement that quashed the 2006-07 sugarcane state advised price (SAP) of Rs 125-130 a quintal, and asked the state government to set up a committee to calculate a fresh price.

The private sugar mills in UP still owe about Rs 860 crore to the farmers for the sugarcane they purchased last season.

"Most of these companies have given us written assurances that they will make payments as and when the banks disburse loans against excise payments as a part of the central government's scheme," said a state official.