The Hindu Business Line : Allahabad HC stays UP decision on statutory price for cane

IN a judgement that could significantly impact sugarcane pricing policy in the country, the Allahabad High Court has stayed the Uttar Pradesh Government's decision to announce a State Adviced Price (SAP) of Rs 95-100 per quintal for cane to be crushed during the 2002-03 sugar season.

The UP Cabinet had, on Tuesday, `advised' an unchanged price of Rs 100 per quintal on early ripening cane varieties (with higher sugar recovery) and Rs 95 per quintal on common varieties for the 2002-03 season (October-September).

This decision was, in itself, a landmark, considering that successive Governments in the past have resorted to hikes in the SAP, bowing to pressures from the State's influential farm lobby. The SAP has been steadily raised from Rs 75-80 per quintal in the 1997-98 season to Rs 80-85 per quintal, Rs 85-90 per quintal, Rs 90-95 per quintal and Rs 95-100 in the 1998-99, 1999-2000, 2000-01 and 2001-02 seasons, respectively. The Mayawati administration's to `freeze' the SAP for the 2002-03 season at last year's levels was, in a sense, historic.

But in its ruling on Wednesday — made in response to a petition filed by the UP Sugar Mills Association (UPSMA) — the Allahabad High Court has stayed the implementation of the Cabinet's decision to declare even an unchanged SAP. The Court has held that paying even last season's SAP was beyond the capacity of mills in the State, particularly in the context of the crash in open market prices of sugar.

The UPSMA had challenged the Cabinet decision, despite the fact that the SAP is applicable only to cooperative and State-owned sugar mills. Private mills are not obliged to cough up the SAP, since it is only an `advised' price of the State Government. The mills, technically speaking, are required to pay only the lower Statutory Minimum Price (SMP) fixed by the Centre, which, for the 2002-03 season, averages Rs 75.14 per quintal in West UP and Rs 71.34 per quintal in Central and Eastern UP.

While there is no legal obligation to pay the SAP, private mill owners, however, say they end up procuring cane at this rate for two reasons. The first is purely political: no mill owner can afford to be on the wrong side of the State Government, given the traditional proximity of the industry with the powers-that-be.

Secondly, of the 4.5 million tonnes-odd of sugar produced in UP — which is the country's second largest producer after Maharashtra — roughly a fifth is accounted for by cooperatives, who have no alternative but to pay the SAP. And considering that the cooperative factories are often located in the vicinity of the cane area of the private mills, the latter are also forced to pay the higher price.

The Allahabad High Court has, however, ruled that there is no question of even the cooperatives or state-owned mills paying the SAP in the current season, given that they do not have the capacity to cough up this rate at existing low realisation levels on sugar. It has upheld the UPSMA's plea that payment of the higher SAP would tantamount to both misuse of public money as well as denial of level-playing field to private mills.

The High Court's stay order comes as a major boost to the industry, which is now expected to pay only the SMP of Rs 71-75 per quintal for the cane procured in the current season. This would, in fact, be lower than even the SAP of Rs 75-80 per quintal declared for the 1997-98 season.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
TN Govt to network agricultural markets

Allahabad HC stays UP decision on statutory price for cane

Upasi to go ahead with tea futures

Change in NY delivery mechanism — No impact seen on domestic cotton