HC orders sale of 15% UP sugar stock in relief to stakeholders

Written by Deepa Jainani | Lucknow | Updated: Aug 14 2014, 05:42am hrs
In partial relief to all stakeholders farmers, millers and banks the Allahabad High Court on Wednesday ordered that 15% of the entire 30 lakh tonne sugar stock in Uttar Pradesh be sold in three weeks and the money deposited with the district magistrates in a separate account, who would then pay 30% of that to farmers against their cane dues and hold on to the balance till the court orders who gets the money in its next hearing. The HC bench hearing the issue of cane dues was headed by Chief Justice DY Chandrachud.

The banks, on their part, argued that since the sugar has been hypothecated to them, they have the first right on the stock in the event of liquidation. Assuring the banks that their case will be considered in the next hearing, the bench promised to decide on the modus operandi of the payment of the rest 70% in its hearing on September 3.

Remarking that the state government could not auction sugar as per expectation and achieve the expected revenue figures, as selling sugar was a specialised activity, the court handed over the selling part back to the industry and set the floor price for selling sugar at R3,100 per quintal. The industry would now sell the stock and deposit the money with the respective district magistrates.

Significantly, the court also ruled that coercive action on sugar mills will remain suspended for three weeks.

As per the order, of the approximately 30 lakh tonne of sugar that is in stock at present, the millers will sell 15% in three weeks, which would mean that about 4.5 lakh tonne will be sold to realise about R1,400 crore. Of this 30%, ie, roughly R400 crore, will go to the farmers while the rest will be held by the state government till further orders by the court.

Speaking to FE, representatives of SBI and PNB, which have made advance payments to the sugar sector, said that since banks have extended advance working capital to the sugar mills, they have first right on the money once sugar stocks are sold.

We will make a forceful presentation that if we do not get our money back, we will not give working capital for the next year, said a banker on the condition of anonymity.

Commenting on the day's ruling, a miller said working in UP's sugar sector has become a disaster. The state has extended a dole of R400 crore to bail out cooperative mills, which means it has paid R58 per quintal. So technically the government has said on its own accord that the paying capacity of mills is about R220 per quintal only. Secondly, based on the court's orders, no bank is now ready to extend us money for running the mills next year. As a result, as far as the sugar is concerned, UP is a dying bed unless the state realises that the mills are just convertors and we need just conversion rates to stay in operation. The only way out is sugar-cane price linkage, he said.