Indian sugar mills association

Apex Court upholds UP`s State advised price for sugarcane

Date:	18 Jan 2012

Source:	The Business Line

Reporter:	BL Bureau

News ID:	860

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New Delhi, Jan. 17: Sugar mills in Uttar Pradesh have to shoulder an additional burden of over Rs 1,100 crore after the Supreme Court upheld the State Government`s State Advised Price (SAP) for 2006-07 and 2007-08 seasons.

The court on Tuesday quashed the interim relief order and directed the mills to pay the dues arising from the difference between the SAP and the cane price they had actually paid within three months. The UP Government had fixed the SAP at Rs 125 a quintal for both years. Millers had at that time gone to the court and got an interim relief to pay a lower rate by Rs 15/quintal.

“The interim order has been quashed and for 2007-08; we expect the incidence to be approximately Rs 1,100 crore by virtue of this order,” an official with Indian Sugar Mills Association (ISMA) said. The UP sugar mills had crushed approximately 750 million quintals of cane in 2007-08. For 2006-07, the quantum of incidence is not known as the number of mills benefited by the interim order is not known yet, ISMA said.

Sugar scrips slide

Following the Apex Court order, equities of UP-based sugar mills such as Balrampur Chini and Bajaj Hindustan fell on the bourses. Balrampur Chini touched an intraday low of Rs 38.70 on the BSE before closing at Rs 39.25, a loss of 3.68 per cent over the previous close. Similarly, Bajaj Hindustan ended 2.78 per cent lower at Rs 29.60, while Triveni Engineering and Industries Ltd shed 4.58 per cent to close at Rs 17.71.

Tuesday`s order will create an additional burden for sugar mills that are already reeling under the impact of the high SAP for the 2011-12 season that began in October. As cane crushing goes on in full swing in UP, cane arrears have already started building up as mills exhaust their credit lines.

Significantly, the Apex Court on Tuesday also referred its 2004 decision upholding the State Government`s right to fix the SAP to a larger seven-member bench. The sugar mills had challenged the legality of the powers of the State Governments to fix the cane price. The mills had claimed that the 2004 judgement of the Apex Court was virtually contradictory to another judgement of the same court.

This was considered by the three-judge bench, which was of the view that since the 2004 judgment came from a 5-judge bench the matter may be considered by a larger bench i.e. the Constitution Bench comprising seven judges. “This is a welcome judgement and definitely it would be beneficial for the sugar industry,” the ISMA official added.

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