Mills to pay interest on delayed cane payments for 2012-15: Uttar Pradesh to HC

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Published: April 6, 2019 3:33:56 AM

In an affidavit filed before an Allahabad HC Bench, UP cane commissioner Sanjay Bhoosreddy said while profit-making sugar mills would pay an interest of 12% on their dues to farmers, loss-making units would have to pay an interest of 7%.

sugar Mills, cane payment, Uttar Pradesh, allahdabad HC, sugarcane, sugar production, news

In a major development for the sugar industry in Uttar Pradesh, the state government on Friday filed a compliance report and assured the Allahabad High Court (HC) that the sugar mills in the state would pay an interest on delayed cane payments for the 2012-15 sugar seasons.  In an affidavit filed before an Allahabad HC Bench, UP cane commissioner Sanjay Bhoosreddy said while profit-making sugar mills would pay an interest of 12% on their dues to farmers, loss-making units would have to pay an interest of 7%.

According to the cane commissioner, of the 119 sugar mills operational in the state during those years, around 10 were profit making while the rest were loss making. Giving a rough estimate, he said the total payout on sugar companies would amount to Rs 2,000 crore approximately. This development comes at a time when the UP sugar industry is reeling under a huge crisis, with cane dues mounting to gigantic proportions of Rs 9,988 crore for the current season, as on April 4, due to a glut in the domestic sector, leading to huge inventories, combined with nosediving sugar prices.

Friday’s assurance by the cane commissioner comes after VM Singh, national convenor of the All India Kisan Sangharsh Coordination Committee filed a contempt petition in the Allahabad High Court against non-compliance of the court’s order issued on March 9, 2017, in which he claimed that cane dues of the farmers had been paid for the three years – 2012-13, 2013-14 and 2014-15 by sugar companies, but the payment was delayed beyond the 15 days, and therefore, as per the Sugarcane Control Order, 1966, the interest upon the dues was to be paid if the payment was delayed beyond 14 days. However, in contravention of that provision, interest upon cane dues had been waived by the previous government.

The HC had on March 9, 2017, had set aside the state government’s decision to waive the interest citing mills’ inability to pay in view of low sugar prices. “But by that logic, shouldn’t the interest being paid by farmers on loans from state-owned and cooperative banks also have been waived? In this case, farmers were basically supplying cane to mill at zero interest, even while borrowing at 10-15% or more themselves,” the HC had stated, while upholding the power of the cane commissioner/state to waive the interest under the state Act.

The HC had quashed the Cabinet decisions whereby the interest amount to be paid by the mills to cane growers was waived, saying the waiver was arbitrary as cane growers’ interest was not protected. The Opposition has blamed the state government for overmounting sugarcane arrears, leading to the chief minister issuing clarifications in which he has claimed credit for ensuring payments of cane dues worth Rs 60,000 crore during the past two years, ever since his government came to power in the state, including clearing arrears of the previous crushing season.

For the record, during the 2012-2015 period, sugar mills in UP defaulted on payments and owed farmers Rs 2,000 crore as interest, in addition to the principal amount.

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In April 2015, they approached then Akhilesh Yadav government with the proposition that interest dues be waived off as the ‘mills were making losses and could not afford to pay the interest’. Yadav agreed and in October 2016 decided to waive off interest amounts that
were owed by sugar mills to farmers.

This waiver was challenged by the All India Kisan Sangharsh Coordination Committee before the HC. The farmers’ organisation asked the state government to ensure that all 119 mills in the state pay the balance cane dues of Rs 1,112 crore with 15% interest for 2013-2014 immediately or their units be auctioned in terms of the statute, etc.

On February 5 this year, a single-judge Bench of Justice Suneet Kumar asked the cane commissioner to ensure payment of pending interest on payments due with mills to the tune of Rs 2,750 crore to sugarcane farmers within two months, in compliance with an order issued on March 9, 2017 or face charges.

It also ordered the cane commissioner to examine the claim of each and every company for waiver of interest upon sugarcane dues for all the three years – 2012-13, 2013-14 and 2014-15 and had fixed April 5 as the next date of hearing and directed the cane commissioner to file a compliance report.

Interestingly, this development also comes at a time when the first phase of Lok Sabha elections is less than a week away and a rattled Uttar Pradesh government is wary of facing a backlash from angry cane farmers. The issue has also attained heavy political overtones, with leaders of the Opposition using the issue to the hilt before polls.

It may be mentioned that in order to douse the antagonism among farmers, the state government has been trying its best to get cane payments done and had released Rs 500 crore for the 24 state cooperative sugar mills along with Rs 600 crore of pending co-generation dues of various sugar mills a few days back. The cane commissioner’s office had also said sugar mills will have to use the entire amount of Rs 1,100 crore for clearing cane dues and ensure that the money is credited in the bank accounts of the farmers within the nest two-three days.

There are 119 sugar mills operational in the state this year, out of which 94 are private mills, 24 cooperatives and one belongs to the UP Sugar Corporation.

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