UP sugar millers move SC over state advised price of sugarcane

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Mar 31 2012, 06:54am hrs
Challenge HC order that upheld the legislative competence of state govt to fix SAP

Uttar Pradeshs private sugar millers on Friday moved the Supreme Court against the state governments decision to fix the state advised price (SAP) for sugarcane at R235-250 per quintal for 2011-12.

Former chief minister Mayawati had tried to woo farmers by increasing the SAP by R45 against the previous years R205 per quintal. The current price is also highest in the country.

The millers, lead by Dwarikesh Sugar Industries and East UP Sugar Mills Association, have challenged the Lucknow Bench of the Allahabad High Courts February 10 order that upheld the legislative competence of the state government to fix SAP. The high court, while refusing to set aside SAP for the sugar season 2011-12, had also imposed a cost of R50 lakh on them, of which R25 lakh would go to the sugarcane research institute in Shahjahanpur.

About three dozen private millers had moved the high court, contending that the SAP was arrived at without logic and would put severe financial pressure on them.

The millers submitted that the power of the state government to fix SAP stood overridden by amendments made by the Centre to the Sugarcane (Control) Order, 1966. The amendment, which came into effect from October 1, 2009, had deleted the concept of minimum price and introduced the concept of fair & remunerative price (FAR).

They said that the Centre, on March 14, had fixed a fair and remunerative price (FRP) of R145 per quintal of sugarcane for 2011-2012, after considering the cost of cane production, return to mills from sugar/byproducts, such as molasses, bagasse and press mud, and a suitable margin for risks and profit for farmers.

According to the mills, the UP government, in purported exercise of power under Section 16 of the UP Sugarcane (Regulation of Supply and Purchase) Act, 1953, has fixed the SAP of R240 per quintal, which is over 65% more than the FRP fixed by the Central government.

...Ex-facie, the SAP fixed by the state government is arbitrary, unreasonable and illegal...the Central government having come to the conclusion, after considering all factors that the cane price of R145 per quintal would give a reasonable margin to the cane growers and also to the manufacturers of sugar, clearly a 65% higher cane price cannot possibly be rational or reasonable, Dwarikesh said in its petition filed through Parekh & Company.

Stating that such a hike will result in huge losses to the industry, Dwarikesh said that the UP sugar mills in the last five years had been incurring substantial losses due to high SAP. For 2010-2011, the UP sugar mills have incurred losses of R1,200 crore, it said, projecting the estimated losses for this season at R2,967 crore.