With the apex court dismissing petitions filed by PSU banks claiming the first right over more than R5,000 crore of stocks lying with sugar mills, uncertainty in the Uttar Pradesh sugar industry deepened on Monday.
While the SC's decision is being seen as a major victory for farmers, who have been repeatedly stating that the first right over sugar stocks lies with them, as it is they who have supplied the raw material for the sugar, it signals a setback both to sugar mills and banks, who feel the decision is likely to discourage loans to the sector, what with the risk of advances to mills turning into non-performing assets (NPAs).
Talking about the effect the decision would have on farmers, VM Singh, convener of Rashtriya Kisan Mazdoor Sangathan who has been fighting for the cause of the farmers, told FE it was a big day for farmers. "This is a landmark judgment whereby, on the one hand, current dues of almost R2,800 crore plus R600 crore as interest will be paid by October 31, since sugar stocks of about R7,000 cr are still there, and on the other hand, banks will no longer give money to the mills, who have been known to divert the same into other businesses, but will pay money directly to cane growers, through accounts opened with the DMs. It is indeed a decision which will mark a turnaround in the lives of farm growers," he said.
With the court taking a strong view on the issue, the stalemate on the issue is likely to get intensified. While on the one hand mills are unwilling to start operations unless an “affordable” cane price is announced and have written to the state government about their decision, the government has not yet announced the cane price.
“The government wants us to enter into a contract which states that we would give whatever it sets as cane price without even knowing what that price could be. It is a blind gamble, one which we are unwilling to take anymore, given that we are already in problems. We want clarity on the price before we enter into a contract with farmers and start crushing,” said a miller, adding that out of the 95 private sugar mills, not one has started on repair and maintenance work, which usually takes about 8-10 weeks' time. “Even if the government announces an “affordable” cane price today and we start repairs at the factories, we would not be able to start crushing before mid-December, which would push back the season by more than a month,” he said. Cane crushing in UP begins after Diwali, or early November.
The standoff between the sugar industry and the state government over cane prices could lead to an economic crisis for sugarcane growers. Almost 5 million farmers in the state depend on sugarcane for their livelihood and in most parts of the state, sugarcane is the backbone of the rural economy and drives up sale in other sectors such as consumer durables, automobiles, etc. With acres of sugarcane fields ready for harvesting by the end of the month, farmers would soon start looking for buyers for cane.
“If the stalemate between the state and mills continues for long, small and marginal farmers would be the worst sufferers as they are the ones who would not be able to hold on to their crop for long. If the mills do not start buying their cane, they would be forced to sell their stock to the kolhus and crushers, who would take advantage of the situation and offer about half the money that the state would fix as cane price. In this situation, wouldn't it be better if the government relented and agreed to a linkage formula, which would set at rest everyone's fears? Farmers would get at least the fair and remunerative price fixed by the Centre, which has been fixed at R220/quintal for the 2014-15 season,” said another miller.