Indian sugar mills association

SC directs sugar mills to pay R900 cr in dues to farmers

Date:	18 Jan 2012

Source:	The Financial Express

Reporter:	Indu Bhan & Deepa Jainani

News ID:	857

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New Delhi/Lucknow: The Supreme Court on Tuesday directed private mill owners in Uttar Pradesh to clear approximately R900-crore dues to sugarcane growers for 2006-08. The entire amount would be given to around 50 lakh farmers within three months, failing which the mills will have to pay interest at the rate of 18%.

A Bench, headed by Justice Dalveer Bhandari, while directing sugar mills to pay farmers at the state advised price (SAP) of R125 per quintal fixed by the state government, referred to a seven-judge constitution Bench an important issue of whether the state has the power to fix the sugarcane prices that mills are obliged to pay farmers.

Reacting to the apex court`s decision, Rashtriya Kisan Mazdoor Sangathan convenor VM Singh, who had been fighting the case on behalf of the farmers, said this decision had “reaffirmed the faith of the farmers in the judicial system”.

However, for the sugar industry in Uttar Pradesh, already reeling under the `excessively high` cane price of R140 per quintal declared by the Mayawati government in November last year, against which it has already gone to the Allahabad High Court, it is another bolt from the blue.

The Supreme Court`s ruling on Tuesday directs the private sugar mills in the state to pay farmers the balance between the SAP fixed by the state government and the statutory minimum price (SMP), as was paid by the industry in 2006-07 and 2007-08. This way, UP private sugar mill owners will have to pay approximately R1,000 crore to the farmers, which the industry feels will “break its back”.

Talking to FE, director general of Isma, Abhinash Verma, said apart this decision would add to the woes of the industry in UP, which is already on the brink, but added that the timing of the decision was very inconvenient.

“We are in the peak of a cane crushing season. For the next three months, the industry is required to pay farmers for the cane purchase, which is anyway on the higher side. We can either pay them the prices for the current cane purchase or the past payments. We are in no condition to do both as there is a severe liquidity crunch in the sugar sector. We, therefore, hope that either the Centre or the state government will give us some subsidy or long-term interest-free loan to tide over the crises,” he said.

Stating that the move will “cripple whatever is left of the industry in UP”, Vivek Saraogi, managing director, Balrampur Chini Mills, said that what was bad for the industry was the fact that while the cane price had been fixed `exorbitantly high`, the sugar prices, on the other, were depressingly low for the industry to break even. “The balance payment of 2006-08 is the last nail in the coffin,” he states.

Terming it as `very unfortunate` and a very bad decision for the industry, executive director and CEO of Simbhaoli Sugars GSC Rao said: “The millers are already reeling under the onslaught of high cane price declared by the state government. This decision will further affect our working and what is worse, will lead to cane arrears. The industry will be enormously burdened.”

UP chief minister Mayawati, on the brink of an Assembly elections, had in November last year announced a hike of R35 per quintal on the SAP of cane as against last year in order to appease the cane growers in the state. But the industry had termed it “suicidal”, adding that with domestic prices of sugar refusing to go up, it would be wrong to burden the industry with high cane prices.

“There is just no justification for increasing the sugarcane prices this year, especially as the domestic sugar prices are low. Just setting a high price is not important. The government must also look into the fact that the industry is not burdened in such a way that it goes into the red and finds itself unable to pay farmers the cane price. It is in such cases only that mills start defaulting on payments and cane arrears start building up,” said a miller in the state.

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