Even as sugar mills in Uttar Pradesh push the state government for a sharp cut in cane prices in the wake of mounting losses, they have sought clarity from the Supreme Court on the Akhilesh government’s power to fix the state advised cane price (SAP).
An apex court bench headed by chief Justice PS Sathasivam will hear on Tuesday the West UP Sugar Mills Association’s plea on the issue. The apex court had in January 2012 referred the matter for consideration to a larger bench of seven judges.
The sugar body has told the apex court that the industry in UP has been facing losses on the account of high SAP by the state government merely for political considerations.
Meanwhile, the UP government has asked its district magistrates to ensure sugar mills start crushing sugarcane soon – by November 25 for mills in western UP and November 30 for the rest of the state.
While the sugar prices during the last three years have been increased from Rs 165 a quintal in 2009-10 to Rs 280 a quintal in 2012-13 (increase of 70% in three years), the mills in their fresh application said that the sugar industry has suffered loss of Rs 3,066 crore and Rs 2,180 crore during 2009-10 and 2011-2012, respectively. It pegged the loss for 2010-11 at Rs 1,200 crore and the cane price arrears for 2010-11 and 2011-12 at Rs 461 crore and Rs 4,400 crore, respectively.
The association further said that even the UP sugar industry is likely to suffer a loss of Rs 3,200 crore this year as the cane price paying capacity of the factories is not more than Rs 240 per quintal on an estimated realisation of Rs 3,350 per quintal.
The cane price arrears during the year as on January 9 are Rs 2,571 crore, which is equivalent to 51% of the total cane price, according to the sugar mills. “This shows the enormity of the worsening financial position of the sugar industry this year on account of an excessively high cane price,” the application stated, adding that the issue in the appeals is a recurring one and their sugar factories are continuing to suffer huge losses year after year due to the wholly arbitrary and excessive fixing of sugar cane price and thus the issue needs to be “urgently settled” by the apex court.
The body further said that despite powers of the central government to fix the statutory minimum price under the provisions of the sugarcane (control) order of 1966, the UP government had been fixing the cane price (SAP).
While the Allahabad HC had in December 1996 held that the state government had no power to fix the SAP as the power to fix the cane price was only with the Central government, the Lucknow bench of the HC in February 1999 took a contrary view and upheld the powers of the state government to fix the cane price.
The Centre amended the 1966 Act in 2009 and replaced the words “Statutory Minimum Price” by word Fair and Remunerative Price (FRP).