Indian sugar mills association

Uttar Pradesh allows lifting of molasses

Date:	04 Jan 2012

Source:	The Financial Express

Reporter:	Deepa Jainani

News ID:	821

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Lucknow: The Uttar Pradesh excise department has finally buckled under pressure from the courts and has issued orders to three sugar companies allowing the transfer of molasses from their sugar factories to distilleries for captive consumption. The sugar factories had been pleading with the government to allow them to transfer molasses to their own distilleries for self-consumption and help avert the situation of molasses overflow, leading to closure of cane crushing operations.

They had on their side the Allahabad High Court`s order of March 2011, which struck down the state government`s classification of units or distilleries within the same premises or in contiguous vicinity of the sugar factory as unreasonable and stated that the words “captive consumption” clearly meant that anything which is manufactured would not go out of the hands of the manufacturer but would be consumed for his own purpose.

However, when no relief came their way, some sugar companies filed contempt of high court orders on the excise department last week and a hearing in a similar matter is expected to come up on January 4.

Fearing yet another rap by the court, the excise department has permitted three sugar mills, Dhampur Sugars, Triveni Sugar and Engineering and Dwarikesh Sugar, to transfer the molasses for their captive consumption as per the indents that they have raised. While Dhampur has obtained permits of 200,000 quintals and 150,000 quintals for its Dhampur and Asmoli factories respectively, Triveni has obtained permit for transferring 2 lakh quintals of molasses for its Khatauli factory and Dwarikesh`s Bundki factory can now transfer 7.5 million quintals to its distillery.

The excise policy 2011-12 clearly states that all sugar factories must set aside 22% of their molasses as levy for country liquor. But it also states that those mills that have captive distilleries will be exempt from the levy until such time that their own requirement is met.

After their own consumption needs are fulfilled, the mills are required to set aside 22% of the remaining stock for country liquor. However, despite this being stated in the policy, the excise department had so far dithered from allowing permits to the mills, following which a dual problem was being faced by the mills.

“While on the one hand, the distilleries are going dry, on the other, molasses tanks are overflowing leading to a situation where the mills may have to stop crushing sugar as we are running out of space to store molasses,” said a mill owner.

In fact, the commissioner of Saharanpur division had to write to the excise department on December 17 recommending that the Mansoorpur unit of Dhampur Sugars be allowed to transfer molasses so as to avert the overflow of molasses and also to keep the cane crushing process on.

“The mill must keep crushing in the larger interests of the farmers, who need to evacuate their sugarcane fields so as to be able to start wheat sowing. If they are inconvenienced, it may give rise to a law and order situation,” he stated. A similar molasses overflow situation persists in many other mills and all of them are contemplating going to the courts to seek reprieve.

Interestingly, even the distilleries attached to state cooperative sugar mills have been suffering due to this apathy and matters have reached a level where cane commissioner Kamran Rizvi had to write to the excise department. “Four distilleries attached to Sampoornanagar, Nanpara, Kayamganj and Ghosi sugar mills come under the “captive unit” definition as per the UP Sheera Adhiniyam 1964, which has also been upheld by the Allahabad HC in March 2011. Despite this, they are not being allowed to lift the molasses from the sugar units, following which these distilleries have been closed for the last five months,” he wrote, adding that this is making these units financially unviable.

“I request the excise department to take cognizance of the Allhabad HC order and recognise the units as `captive`,” Rizvi wrote. He added: “If these units start getting molasses stock, they can restart production and can make profits again. They will also add to the state government`s revenue collection.”

According to an industry source, the industry has a genuine requirement for self consumption to sustain the high cane prices.

“It is beyond our knowledge why the department is not permitting us to transfer molasses for our own consumption despite the state government`s excise policy clearly stating so. If we are not allowed to function, there is a very big possibility that we might default on the cane payment to farmers,” said another mill owner.

However, on being asked about the matter, excise commissioner, Mahesh Gupta said that some sugar mills were wanting to transfer the molasses without proper indents. “All those who have raised indents have been granted permission to transfer molasses, including the state cooperative sugar mills. It is a normal routine, and there is nothing strange about it,” he said.

“It is clear that the distance of the unit to which the molasses is dispatched is clearly immaterial and irrelevant....” the Allahabad HC had opined in its March 2011 order and added that the impugned amendments have a direct and immediate effect and impact impeding the freedom of trade and commerce guaranteed under the Constitution of India and thus is in serious violation of the Constitution of India.

Consequent to the HC ruling, the state government has challenged the HC order in the Supreme Court.

There are a total of 37 captive distilleries in the state, including six of the Bajaj Hindusthan group, three of Balrampur Chini, two each of Birla, Dhampur and Simbhaoli groups and one each of Triveni, Dwarikesh, Mawana, Dalmia etc.

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