The Centre, it may be recalled, had last week increased the SMP by Rs 50 per tonne from Rs 645 per tonne linked to 8.50 per cent recovery to Rs 695 pursuant to largescale protests by the cane growers in Uttar Pradesh.
Two broad reasons one which is more general in nature applicable to across the country and the other more specific to south India has prompted the mills to consider the legal recourse seriously.
The mills see revision as entirely political. There has been no change in the ground realities between Committee on Agricultural Cost and Prices announcement of SMP for the current sugar season in October and today.
Moreover, the mill-wise SMP calculation was sent out by the government only a couple of weeks ago based on the original SMP of Rs 645. The sudden decision was to set the atmosphere right in Uttar Pradesh where BJP along with BSP is contemplating a mid-term poll after its sweep in Gujarat, charged a few players in the industry.
If they wanted to do something for the cane growers they could have given some relief outside the SMP. Adding it to SMP means the adverse ripple effect in the years to come, some said.
With the open market sugar selling at lower than the levy price, most mills especially the co-operative sector are already finding it difficult to meet their existing obligation with regard to cane price.
A hike in cane price now will be too hard to face and service, they said adding that as per law inability to pay cane price within 14 days, even due to genuine reasons, can lead to attaching of the factory and recovering of the dues as arrears of land revenue. Considering this legal remedy is the safest bet, they said.
It appears that the India Sugar Mills Association is yet to make up its mind on the course of action. It is reportedly divided on the issue as mills in Uttar Pradesh support the governments decision. They faced a unique problem of low cane availability when they decided not to pay a SAP of over Rs 900 per tonne paid till last year due to the problems faced by the industry. A relatively low SMP began to hurt them and a Rs 50 per tonne hike came in handy to improve cane availability.
Mills in south India have suffered a lot due to political pricing of sugarcane.
The state advised price (SAP) was extensively used as a tool by politicians to win votes. They now do not want statutory minimum price to become another tool. Governments action has set a clear precedent where the Centre government in future can, for political reasons, increase SMP in an ad hoc manner.